Alstom Wins $3 Billion Indian Railways Contract -- Update
November 10 2015 - 7:56AM
Dow Jones News
By Sean McLain and Niharika Mandhana
NEW DELHI--Indian Railways signed two long-stalled,
multibillion-dollar deals for freight locomotives this week, with
France's Alstom SA and General Electric Co. of the U.S., that are
part of a broader push by the country to improve infrastructure and
drive industrialization.
Under the agreements, Alstom and GE are to build hundreds of
locomotives in India in partnership with Indian Railways, giving a
boost to Prime Minister Narendra Modi's efforts to increase
domestic manufacturing and help India close a yawning development
gap with its East Asian neighbors.
"These are huge projects," said Amitabh Kant, who oversees Mr.
Modi's "Make in India" campaign.
The deals were years in the making, and detailed contracts still
need to be finalized. Alstom and GE are to own 74% of their
respective joint ventures with Indian Railways, which will hold 26%
stakes in the companies.
Alstom is to build 800 electric locomotives for $3 billion; GE
is make 1,000 diesel locomotives for $2.6 billion. Both are to
deliver the engines over about a decade.
The projects, conceived of nearly a decade ago, fell prey to
bureaucratic indecision, with the government worried the railways
wouldn't be able to upgrade and expand quickly enough to use all
the new locomotives, according to a senior Railway Ministry
official, who declined to be named.
GE Chairman Jeff Immelt, who has long seen India as an important
market, had pushed hard for the deal, expressing frustration with
delays in 2011 and saying, half-jokingly, that if he couldn't get
it done before he retired, "my own self-worth would be diminished
immensely."
Banmali Agrawala, the head of GE's India operations, said
Tuesday: "Twice or thrice it started, and couldn't be completed for
whatever reason," adding: "We've been through some painful moments.
I'm glad it's over."
Prime Minister Modi, who took office last year, has pledged to
cut red tape, modernize infrastructure and boost India's economy.
The government has eased limits on foreign investment in businesses
ranging from defense to insurance.
Mr. Modi's approach so far has been largely an incremental one.
For example, he has preferred efforts to make mammoth state-owned
enterprises like Indian Railways, Coal India and the country's
largest banks perform better under government management than to
privatize them.
Partisan fighting in India's Parliament has slowed progress on a
constitutional amendment aimed at simplifying the country's
patchwork tax system. And, wary of alienating rural voters, Mr.
Modi over the summer gave up on efforts to ease a strict
land-acquisition law.
With an economy that is among the world's fastest-growing, India
is succeeding in its efforts to attract more foreign capital. In
the first six months of this year, India recorded $19.4 billion in
foreign direct investment, up 30% from the same period in 2014.
Foxconn, the Taiwanese manufacturer of iPhones, said in August
it would spend $5 billion to build factories and research sites in
the western state of Maharashtra. India aims to increase
manufacturing to 25% of gross domestic product by 2022, from around
18% today.
The government is eager to tap outside investment and expertise
t o help Indian Railways, a state-run behemoth that employs 1.3
million people, to move goods and people faster and more
reliably.
This week's locomotive deals are part of a $128 billion plan to
upgrade the creaking infrastructure of India's railway network that
transports 23 million Indians every day.
"Where there is infrastructure, the pace of development
quickens," Mr. Modi said last week at a ceremony to lay the
foundation stone for a highway project.
Write to Sean McLain at sean.mclain@wsj.com and Niharika
Mandhana at niharika.mandhana@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 10, 2015 08:41 ET (13:41 GMT)
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