GE Transportation says it will have 70 per cent localisation by value when it produces its locomotives for the Indian Railways. Nalin Jain, GE Transport President and CEO, International, GE Transportation, told BusinessLine in an interview that they are sourcing components from 60 Indian factories and 10 international firms that have expanded in India. On how global restructuring at GE would impact the Indian project, Jain refused to comment, but said the contract with the Indian Railways has clauses for change of name and control. Excerpts:
How does India fit in GE Transportation’s business?
We worked pretty hard on the project – probably a decade – and finally we managed to win the contract in India. This is the largest contract for GE Transportation globally. The Bangalore facility has done a lot of work, although it would be difficult to put in a number about the extent of value added.
What are the firm’s hiring plans in India?
In the last two-three years we have made great progress. First, the project team itself, which we built ground up. It was a mix of talent from outside and from GE as well. So, a mix of rail and industry experience. For the Marhowra factory we made every effort to hire from Bihar, Jharkhand, so that retention won’t be a problem. We hired from polytechnics, put them through apprenticeship programme in the Pune facility of GE. They were provided tool-room training in a centre of the Ministry of Small and Medium Enterprises. We established a welding school there, a key skill for building locomotives. The students are right now helping build the processes at Marhowra, in line with GE’s practices, as the production has not started. We have hired 55 people, who will work on the shop floor. A fourth of the students hired are females, in keeping with our diversity norms. For the unit in Roza, which is our maintenance unit, we have hired people with industry and rail experience. They have been trained in Australia and the US, where we have maintenance facilities. They are certified mechanics.
What are the other things that make the project fit into the Make in India theme?
This is a $200 million investment that GE is making in India. We have localised sourcing – 70 per cent of by value – from India. There are 60-odd India tier-one suppliers, and there are ten odd global suppliers, who have set shop in India for this project. The Indian suppliers already had a presence here, but the global suppliers were supplying to us globally, and then decided to set shop here for the 1,000 locomotives order – either directly or through joint ventures. It is our estimate that at a steady-state production, this project will create or sustain 6,000 jobs. Job creation – both direct and indirect – will be 500 at Roza and over 2,000 from Marhowra factory. In 2019 calendar year, when we produce 100 locomotives in India, 6,000 direct-indirect jobs will be sustained.
Has India become an easier place to do business in the last few years?
Yes. Setting up a manufacturing unit required multiple clearances. Two years ago, the Bihar Chief Minister said to us: “We are trying to launch a single window clearance process. Let me pilot that with you.” There was a labour licence we needed to start construction in Marhowra, we filed online application on a Friday, and got the approval on the next Monday. In Roza, we got the environmental clearance in one week. We also needed an electricity connection from the district level for 10 km which came through in eight months (against the perception of two years). We had an outstanding experience – State governments are becoming proactive, competitive, recognising job and value creation.
What will be the impact of GE’s global restructuring on the Indian project?
GE is evaluating options, and has not defined what those options will be. It will be premature for me to comment what the impact would be. The contract includes change of ownership, name, control. I don’t see any issues.
On the demand side from Railways, have you seen any variation in your supply plan and what was in the contract in the first 2-3 years?
The contract says explicitly that there will be 100 locomotives supply every year. It allows for some quantity percentage up or down. We would start production in Bihar in August this year with a slow ramp up. In 2019, 100 locos will be manufactured in Bihar as per production plan. Since we are finishing the plant six months ahead of schedule; our plan is that we will try and produce 50 engines here and 50 in the US, instead of the 100 imports that the contract permits.
You must have had back-up agreements with suppliers. What happens if the demand pattern changes midway, with the Railways talking about speeding up its electrification? Is there a re-negotiation on?
The contract is very firm, approved at the Cabinet level. There is no optionality. It is Railway’s land, leased to joint venture of Railways and GE. There is no renegotiation.
The impact of implementation of GST on the factory, if any?
GST, as a tax implication is a great story, which simplifies the process. The contract has a change of law clause, clearly allowing the beneficiary to compensate the other side to maintain level-playing system. We are still trying to understand the impact of GST. We had to re-orient and transition our IT system, Oracle. The good news was that we were not generating any invoices.
Does forex fluctuation impact the project?
It was a rupee bid. Indian Railways has has hedged itself against the risk. We have also done 70 per cent localisation. Thankfully, rupee has also appreciated.
