Big Plans

Make in India’s focus on the railway sector

The Make in India initiative is one of the premier programmes of the government aiming to place the country on the global map as an important manufacturing hub. The initiative lays significant emphasis on the railway sector, with some big-ticket projects being announced under the programme. Essentially, the programme involves the creation of an environment conducive to domestic manufacturing through various measures such as setting up an enabling policy framework, providing fiscal support, etc. As far as the railway sector is concerned, there is a strong case for resorting to domestic manufacturing, as the country has always been a net importer of railway-related rolling stock, equipment etc. Moreover, as freight and passenger traffic is increasing, the need for indigenous production is further magnified.

Recent developments

  • Contracts for loco factories in Bihar awarded: In November 2015, contracts for setting up loco factories in Bihar were awarded. The diesel locomotive factory in Marhowra (awarded to General Electric) will cost Rs 20.52 billion while the facility to manufacture electrical engines in Madhepura (awarded to Alstom) will entail an investment of Rs 12.93 billion. These facilities are expected to supply 1,000 diesel locomotives and 800 electric locomotives over the next 10 years to the domestic market. Of the 1,000 locomotives to be supplied by GE, 100 will be imported while the remaining 900 will be manufactured indigenously. The Madhepura facility will manufacture 800 high-power electric locomotives.
  • Bids invited for the train set project: Indian Railways has invited bids for a Rs 25 billion project involving the procurement and manufacturing of 15 train sets which will be used for faster intercity travel. The successful bidder will import two train sets, while the rest will have to be manufactured in the country. As per the request for proposal for the project, 276 coaches will be manufactured in India while 40 will be imported. In January 2016, the qualified bidders sought more time and some changes in the bidding documents before submitting the financial bids. The five bidders that have qualified for the project are Alstom-Bharat Earth Movers Limited, Construcciones y Auxiliar de Ferrocarriles-Bombardier, Hitachi-Ansaldo, Kawasaki-Toshiba-Bharat Heavy Electricals Limited, and Siemens.
  • Bids invited for Kanchrapara coach factory: In October 2015, the Ministry of Railways (MoR) floated a global tender inviting bids from companies for setting up a Rs 12 billion rail coach factory at Kanchrapara in West Bengal. The MoR intends to select a joint venture partner through open competitive bidding and the tender for this opened in December 2015. The bidding process was scheduled to be completed by March 2016; however, no further update is available.
  • Other projects commissioned under the Make in India initiaitve: Over the past year, a rail wheel plant was commissioned at Bela. Besides, a factory for manufacturing traction alternators at Vidisha was also inaugurated. Another facility for producing forged wheels is planned at Rae Bareli. During the year, Rail Spring Karkhana developed five out of the 16 variants of the Linke Hofmann Busch coach springs. In addition, easing the foreign direct investment (FDI) norms for a number of segments in the railway sector will also attract further interest from foreign investors and manufacturers.
  • Prototype coaches showcased: In January 2016, a prototype of a 24-coach train was showcased. It is now awaiting requisite clearances before being inducted for passenger service. The coaches have been designed with improved interior furnishings and have modern fixtures. According to railway officials, 111 such luxury coaches, including air-conditioned and general coaches, will be ready by June 2016 and thereafter a decision will be taken on whether they will continue to be manufactured.

In another development, the MoR has given its nod for making Anubhooti coaches, the ultra-modern coaches for executive chair cars in the Shatabdi Express trains across the country. Meanwhile, in the Railway Budget 2016-17, the government also proposed to increase the current procurement of train sets by 30 per cent under the Make in India initiative.

Going forward

While the Make in India initiative is a big leap forward, certain measures need to be taken to ensure that it meets its purpose and targets. Assurance of business, for instance, is very important. While the policy is clear about the 100 per cent FDI permitted in various segments of the railway sector, an assurance of business for overseas players will be critical in determining the success of the programme.

Flexibility in the government’s procurement system is also important. Rigid procurement systems will only ward off investments, both actual and potential. Flexibility on this front will aid investors in planning their investments as well as expansion plans.

Besides, the Make in India initiative rests on the principle of effective technology transfer. Acceptance, testing, verification and adoption of new technologies will hold the key for realising the long-term benefits of the programme as well as in determining India’s export competitiveness.

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