Eye on electrification, Railways looks at winding up Bihar diesel project

The Railway Board is also working on a plan to immediately halt the rehabilitation of diesel locomotives, and ensure that no new investments are made on infrastructure to maintain stocks.

Written by Avishek G Dastidar | New Delhi | Updated: September 18, 2017

When contacted, Ashwani Lohani, chairman, Railway Board, told The Indian Express: “All aspects of the matter are being examined right now. It is too early to comment on the modalities.”Express Photo by Tashi Tobgyal

Given that electrification is the roadmap for the future, the Railways is considering the possibility of exiting or winding up the Marhowra diesel locomotive factory being set up in Bihar’s Saran in partnership with General Electric, two years after the project was awarded.

This possibility was discussed during a review meeting of Railway Minister Piyush Goyal with members of the Railway Board on September 7, according to internal communications issued a day later.

The reason for the proposed move is that diesel will no longer be used by the Railways, which is expeditiously implementing the near-total electrification of its network with the aim of moving to a cheaper and cleaner source of energy.

Following the discussions, the Railway Board is required to move the matter on files “on top priority”, according to the communications. However, any move to exit or wind up the project would require a formal mandate from the Union Cabinet.

When contacted, Ashwani Lohani, chairman, Railway Board, told The Indian Express: “All aspects of the matter are being examined right now. It is too early to comment on the modalities.”

When asked to comment on the proposal to exit the project, a GE spokesperson responded with an emailed statement on behalf of the company. “We are on track and actively fulfilling our contract with Indian Railways to develop and supply 1,000 fuel-efficient diesel-electric Evolution Series locomotives, bringing modern rail infrastructure and new high-skills jobs to the country. Two locomotives have been built and tested. The first locomotive has been shipped and will arrive in India on October 10 for IREE (International Railway Equipment Exhibition),” it said.

“The construction of our Brilliant Factory in Marhaura, Bihar and maintenance shed in Roza, UP are well underway and expected to be completed on time. The project creates a robust supply chain ecosystem in India, constituting 60 new local suppliers and 10 global suppliers to achieve over 70% localisation. Roughly 1,000 direct and indirect roles have been hired to support these efforts in the region,” it said.

Railways officials said that all pros and cons will be taken into consideration, keeping in mind the interests of all stakeholders, before a final decision is taken.

The Railway Board is also working on a plan to immediately halt the rehabilitation of diesel locomotives, and ensure that no new investments are made on infrastructure to maintain stocks.

The decision to go for all-electric traction was taken during the tenure of Goyal’s predecessor Suresh Prabhu last year, and formalised earlier this year, sources said. Goyal took charge of the ministry following the Cabinet reshuffle early this month.

The Railways had awarded contracts for the Madhepura electric and Marhowra diesel locomotive factories in Bihar to Alstom and GE, respectively, in 2015, in a function attended by a number of Union ministers, including Finance Minister Arun Jaitley, who described the twin projects as a “win-win situation” for all stakeholders.

The Marhowra and Madhepura projects were billed as the biggest FDI in the rail sector, together representing around Rs 40,000 crore of investment, according to statements issued by the government.

For both factories, the Railways has committed an assured offtake — in other words, a commitment that it would consume the supplies. But the latest line of thinking within the ministry is that there will be no need for new high-horsepower diesel locomotives, and that the current stock would hold good for the next two to three decades.

Officials said that work on the Marhowra project is proceeding on schedule. According to the timeline, the construction of the main shed was to be completed this year, they said.

“Over 67 acres of land were given by Railways to the project. Work is on in full swing. The contract has a complicated exit clause whose financial implication will now be worked out,” said an official.

The twin projects were former railway minister Lalu Prasad’s “gift” to Bihar, and announced in his Rail Budget speech a decade ago. The latest move may turn out to be a contentious one because the BJP is now part of the JD(U)-led government in Bihar, and the Opposition, led by RJD, can be expected to protest the loss of an industrial project of this size.

“These factories would have led to the substantial development of ancillary manufacturing units, generation of direct and indirect employment, and substantial development in the region,” said an official, referring to an official briefing on the project two years ago.

The previous UPA government had put both projects in cold storage because the assured offtake model was deemed controversial, and linked to possible loss to the exchequer.

The Marhowra project was expected to manufacture and supply modern diesel electric locomotives of 4,500 HP and 6,000 HP — in combination, they could operate as 9,000 HP and 12,000 HP multiple units. Madhepura, on the other hand, would manufacture and supply modern electric locomotives of 12,000 HP.

Under the agreements, 1,000 diesel locomotives were to be manufactured over 11 years at a basic cost of Rs 14,656 crore, and 800 electric units over the same period at a basic cost of Rs 19,904 crore.