Aug 31, 2016

IR calls off negotiations with Kawasaki-led Consortia to procure, manufacture locos

In a setback to Railway Minister Suresh Prabhu’s plans to contribute to Prime Minister Narendra Modi’s ‘Make in India’ initiative, the Indian Railways (IR) have called off negotiations with a Japanese consortium for the acquisition/indigenous manufacture of Next-Gen locos of 9000 horsepower under what had been proposed as a Transfer of Technology (ToT) agreement.
Replacing the ageing fleet of the ABB-locos of the Indian inventory, the Japanese locos would have enabled the doubling of freight train speeds from the existing 25 kilometre per hour to 50 kmph. These had been proposed to be used on the Western Dedicated Freight Corridor, being constructed with a loan funded by the Japan International Cooperation Agency (JICA). The loan terms stipulate that 30% of all procurements (systems and rolling stock) are sourced from Japanese companies.

The IR had been in talks with a Kawasaki-led consortium over the last eight months for the procurement/indigenous manufacture of 200 Japanese locos. Forty of these were to be imported and 30 each were to be brought to India under Semi Knocked Down and Completely Knocked Down condition. The remaining 110 were to be indigenously manufactured.

“Negotiations over price were non-resolvable. It has been conveyed to the Japanese government that the Indian Railways cannot go ahead with the deal under the existing terms”, a senior ministry official informed.

Sources said the Japanese firm had insisted on a minimum price of Rs 36 crore per loco, IR officials had bargained to acquire these at the price that the French Alstom has agreed to supply from the Madhepura plant – Rs 25 crore apiece.

With negotiations collapsed, railway officials are wracking their heads on possible strategies to extract itself from the JICA loan precondition. “If the IR is able to get around the JICA precondition to float a fresh global tender, it might become possible to rope in US or European firms. But talks with JICA officials on this could turn out to be a long-winding process”, an official conceded.