Bid for two tenders worth Rs 35,000 crore over 11-year period

Two Chinese firms — CSR Corporation and CNR Corporation — have created a flutter by bidding for a share of the Indian Railways’ locomotive market.

Both these have bid for setting up two locomotive factories — electric and diesel — in India to supply about 1,800 locomotives to the Railways over 11 years. These two tenders are valued at about Rs 35,000 crore over a 10-11-year period, according to industry estimates.

Now, all eyes are on whether the Chinese firms qualify technically to submit financial bids for the project, as that may set the stage for a more competitive price bids, say sector experts.

Traditionally, American and European firms have been key suppliers of high-tech products in locomotives for the Indian Railways. For the proposed electric locomotive factory to be set up at Madhepura, Bihar, apart from the two Chinese firms, bidders include American firm GE Global, and European firms Bombardier, Siemens and Alstom. Similarly, for the diesel locomotive factory in Marhowra, Bihar, bidders include American firms GE, EMD, apart from CSR and CNR.

Indian Railways is one of the largest markets globally. For EMD, India is one of the top markets after North America, William P Ainsworth, President and CEO, Electro-Motive Diesel and Progress Rail Services, told Business Line.

“Traditionally, European firms have been key suppliers in electric-traction-based rail technology while American firms have had strength in diesel-traction.

“They developed such strength based on the geographical requirement. Europe has a high-speed passenger network, which runs on electric traction. The US, Canada have large rail freight networks, used for heavy cargo movement that use diesel,” said Niraj Kumar, former Director-General, Indian Railways.

That said, the Chinese firms have also become large players by virtue of a large domestic market in China and are looking for business in other markets. “The rail equipment localisation plan of Chinese Railways was linked to the number of locomotives bought from the Western loco suppliers,” said Kumar.

“CNR has 28 per cent share in electric locomotive and 13 per cent in diesel locomotive globally, according to data of German consulting firm SCI. We have supplied diesel locomotives to countries such as New Zealand, Malaysia, Nigeria, Tanzania, Angola and Cuba,” Yang Xiongjing, Division Chief-Comprehensive Department, CNR Import and Export Corporation, told Business Line.

Now, for the two loco factory tenders, even though the Railways has not yet short-listed the firms, experts agree that the Chinese participation will lead to strong pricing pressure.

“There will surely be greater pricing competition if the Chinese firms were to participate. Though the company that wins the project will have to operate in India with Indian workers, the back-office costs of Chinese firms are bound to be lower,” said Kumar.

mamuni.das@thehindu.co.in

(This article was published on October 6, 2013)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.