In the Railway Budget this year, the Minister, Pawan Bansal, announced proposals to set up and upgrade over seven-eight rail-based factories.
This is good news, both politically and economically, as rail-based factories generate direct and indirect jobs and help improve the social and economic landscape of the area.
In this context, it would be interesting to focus on two of the many factories that were announced in the UPA-I regime, primarily because their journey holds significant lessons.
These are the electric locomotive factory in Madhepura and a diesel locomotive factory in Marhowra, both in Bihar.
In fact, the diesel factory even found a mention in the US President, Barack Obama’s, speech during his India visit.
Entangled
These factories were announced in Railway Budget by the then Minister Lalu Prasad and were proposed to be located in his home State. The factories were estimated to involve capital investments of about Rs 3,500 crore, and the bidding process had also moved forward.
In 2009, just before the general elections, when financial bids for both these factories were invited, GE was a single bidder for the diesel loco factory; while there were no bidders for the electric loco factory.
This was primarily due to the global economic slowdown.
However, work on the project restarted after UPA-II came to power. In 2010, the Railways had informed six firms for qualification for bidding — four for electric loco factory, and two for diesel.
For the electric loco factory, the companies that had qualified were Alstom, Bombardier, GE and Siemens; while for the diesel loco factory, two American firms had qualified — GE and EMD (now, taken over by Caterpillar).
But, soon after that, the contractual norms got entangled in inter-Ministerial allegations. Consequently, there has been no forward movement to the next stage — financial bids.
In 2011, Pompa Babbar, then Financial Commissioner of Railways, had pointed out that many changes were made in the contract document after it was cleared by the Cabinet, which could increase the financial liability of the Railways by over thousands of crores. Moreover, in December 2012, the Prime Minister’s Office tried bringing back focus on these projects.
“The bids for the Madhepura project will be called by December 31, 2012, and the project will be awarded before the Railway Budget. The inter-ministerial group set up under the Cabinet Committee of Economic Affairs will consider and approve any necessary changes to documents. Timelines for the Marhowra Project will be announced by December 15,” it stated.
As things stand, there is no clarity on whether these projects will be awarded this year. Top sources in Rail Bhawan admit that the project has become too contentious, making it difficult to take a decision. Many point out that that Bansal’s predecessors had also avoided taking a call on the issue.
Some of contentious issues that need to be resolved relate to the financial pay-out maintenance period. There are discussions on reducing the maintenance period, among others. Also, a lot of time has been spent in deciding on the exact ownership format of factories.
Firm up basics
However, the experience of these two factories make it important for the Railways to first firm up the basics of how they want to go about setting factories before making announcements. Otherwise, they only add to the Railways unending list of pending projects.
From a host of new factories proposed during last few years, only the Rae Bareli coach factory project has started production (UPA Chairperson Sonia Gandhi’s constituency). That too, as a Railways’ wholly-owned production unit, instead of Planning Commission’s stated intent of inviting private investment, given the Railways’ funding crunch.
That said, here are some of the factories from Bansal’s list — a new forged wheel factory at Rae Bareli, Uttar Pradesh; a greenfield mainline electrical multiple units (MEMU) manufacturing facility at Bhilwara, Rajasthan, in collaboration with State Government and Bharat Heavy Electricals Limited (BHEL); a coach manufacturing unit in Sonepat district, Haryana, in collaboration with the State Government; midlife rehabilitation (MLR) workshop at Kurnool, Andhra Pradesh in collaboration with the State Government; a workshop for repair and rehabilitation of motorised bogies at Misrod, Madhya Pradesh; a new wagon maintenance workshop in Kalahandi district,Odisha; a modern signalling equipment facility at Chandigarh, Haryana through public-private partnership route.
It remains to be seen how far these proposals go.
Courtesy: Business Line (March 04, 2013)
This is good news, both politically and economically, as rail-based factories generate direct and indirect jobs and help improve the social and economic landscape of the area.
In this context, it would be interesting to focus on two of the many factories that were announced in the UPA-I regime, primarily because their journey holds significant lessons.
These are the electric locomotive factory in Madhepura and a diesel locomotive factory in Marhowra, both in Bihar.
In fact, the diesel factory even found a mention in the US President, Barack Obama’s, speech during his India visit.
Entangled
These factories were announced in Railway Budget by the then Minister Lalu Prasad and were proposed to be located in his home State. The factories were estimated to involve capital investments of about Rs 3,500 crore, and the bidding process had also moved forward.
In 2009, just before the general elections, when financial bids for both these factories were invited, GE was a single bidder for the diesel loco factory; while there were no bidders for the electric loco factory.
This was primarily due to the global economic slowdown.
However, work on the project restarted after UPA-II came to power. In 2010, the Railways had informed six firms for qualification for bidding — four for electric loco factory, and two for diesel.
For the electric loco factory, the companies that had qualified were Alstom, Bombardier, GE and Siemens; while for the diesel loco factory, two American firms had qualified — GE and EMD (now, taken over by Caterpillar).
But, soon after that, the contractual norms got entangled in inter-Ministerial allegations. Consequently, there has been no forward movement to the next stage — financial bids.
In 2011, Pompa Babbar, then Financial Commissioner of Railways, had pointed out that many changes were made in the contract document after it was cleared by the Cabinet, which could increase the financial liability of the Railways by over thousands of crores. Moreover, in December 2012, the Prime Minister’s Office tried bringing back focus on these projects.
“The bids for the Madhepura project will be called by December 31, 2012, and the project will be awarded before the Railway Budget. The inter-ministerial group set up under the Cabinet Committee of Economic Affairs will consider and approve any necessary changes to documents. Timelines for the Marhowra Project will be announced by December 15,” it stated.
As things stand, there is no clarity on whether these projects will be awarded this year. Top sources in Rail Bhawan admit that the project has become too contentious, making it difficult to take a decision. Many point out that that Bansal’s predecessors had also avoided taking a call on the issue.
Some of contentious issues that need to be resolved relate to the financial pay-out maintenance period. There are discussions on reducing the maintenance period, among others. Also, a lot of time has been spent in deciding on the exact ownership format of factories.
Firm up basics
However, the experience of these two factories make it important for the Railways to first firm up the basics of how they want to go about setting factories before making announcements. Otherwise, they only add to the Railways unending list of pending projects.
From a host of new factories proposed during last few years, only the Rae Bareli coach factory project has started production (UPA Chairperson Sonia Gandhi’s constituency). That too, as a Railways’ wholly-owned production unit, instead of Planning Commission’s stated intent of inviting private investment, given the Railways’ funding crunch.
It remains to be seen how far these proposals go.
Courtesy: Business Line (March 04, 2013)
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