The Hindu Business Line : BEML bullish on metro coaches plans

Metro push
BEML is optimistic of resolving the issue, of sales tax levy of up to 12.5 per cent, at both the ends — with the Delhi Metro and the Karnataka Government.
Pins hopes on large projects for Bangalore, Hyderabad, Goa and Ahmedabad, which are expected to get on track.
The rail coach segment, currently contributing 10-15 per cent of the turnover, is set to grow to 25 per cent in a couple of years.

Bangalore , Sept. 27

A global bid that Delhi Metro Rail Corporation has placed for metro coaches this month has stumped the ambitions of Bharat Earth Movers Ltd (BEML).

BEML was to have supplied 312 coaches to DMRC over four years, as per an earlier Letter of Intent (LoI). The Delhi metro body apparently cancelled the LoI as a Karnataka sales tax levy of up to 12.5 per cent will now make it far costlier.

BEML, which has set its sights on being a major metro player, however, maintains that it is optimistic of resolving the issue at both the ends — with the DMRC and the State Government.

BEML and DMRC signed an MoU in February. The LoI was worth around Rs 1,500 crore.

A senior official said, "We are not going to be affected" as large projects for Bangalore, Hyderabad, Goa and Ahmedabad are expected to get on track.

"While it is true that Delhi Metro Rail Corporation cancelled the LoI placed on us, we are pursuing the matter with DMRC strongly to review the case, as the LoI cannot be withdrawn under memorandum of understanding with DMRC and any issue relating to the price shall ultimately be referred to the Inter-Ministerial Team to decide. Given the situation that BEML has developed in terms of capabilities and manufacturing technology, we would be able to succeed in restoring the LoI and start supply to DMRC," said an official spokesman in reply to queries from Business Line.

He added, "We have also taken up with the Government of Karnataka and are confident of convincing the authorities to exempt BEML metro from sales tax and value-added tax which will further make our price competitive."

Another strategy, according to sources, would be to get into the international competition for DMRC's tender, which is expected to draw European and US majors such as Bombardier, Siemens and Alstom.

The rail coach segment, currently contributing 10-15 per cent of the turnover, is set to grow to 25 per cent in a couple of years, its CMD, Mr V.R.S. Natarajan, had earlier said.

BEML entered the metro rail coaches scene nearly three years ago on the back of signing a technology transfer pact with South Korean's Rotem; it has so far supplied 180 metro coaches to the DMRC and has 40 in the assembly line.

BEML's estimate is that there will be a demand for 1,500 metro cars in the next five years from many States that are improving their urban commutation needs.

It has a dedicated metro coaches manufacturing plant at Bangalore and recently said the newly acquired ancillaries unit at KGF would take care of the Railways' needs.

In such a situation, "Infrastructure availability is imperative and BEML is well geared up to meet requirements for manufacture and supply of various coaches for metros," the spokesman said.

The upcoming demand "will certainly stand good with BEML consolidating its position as a front runner in manufacture of ultra-modern hi-tech coaches in the Indian sub-continent."

Recently upgraded to a category-1 mini-ratna, the Rs 2,200-crore mining equipment major is looking at a 2006-07 turnover of Rs 2,600 crore. Last week, it announced a 60 per cent stake and Rs 100 crore investment in a Brazilian manufacturing joint venture. The new status allows it forge alliances, mergers and acquisitions in its core areas.

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