General Electric Co. and Alstom have won contracts from India's state owned rail company worth a combined of $5.6 billion to supply and service diesel locomotives as the country works to modernise its infrastructure. The contracts are also the biggest deal to be awarded by India to foreign firms.
Last year India opened some types of railway business to foreign investment. GE and Alstom won the business contract against competition from other manufacturers including Canada's Bombardier Inc. and Germany's Siemens.
The railway agreement is part of the Indian's government program called Make in India. The program initiated by Indian Prime Minister Narendra Modi aimed to attract foreign investment to boost manufacturing in India.
According to BBC News, India plans to spend $137 billion over the next five years to improve and modernise the country's railway which are old and overcrowded. More than 23 million of people in India use the railway everyday. India's railway has the cheapest rates to help poor people transport across the country.
India's railways spokesman Anil Saxena, as reported in Reuters, said that Alstom will supply 800 electric locomotives and build a factory in the eastern state of Bihar. The French multinational company operating in the worldwide transport market won the contract total valued about $3 billion (200 billion rupees).
The deal also includes a bid worth $2.6 billion for General Electric alone to provide 1,000 diesel locomotives over the next 11 years, includes a preliminary period of design and preparations for manufacturing. The first units are delivered in 2017.
In a story by The Wall Street Journals, Indian Railways said it would form a joint venture with GE to make the locomotives. GE would hold a 74% stake in partnership while the Indian Railways would own 26%.
The U.S. multinational company also invests $200 million included to the contract to build new manufacturing plant in the Marhowra district in the Indian state of Bihar and maintenance warehouses in Punjab and Gujarat.
The deal is the largest that GE has reached with the Indian government since the first time the company has operated in the country about 113 years ago. It is also the biggest contract ever won by GE's transportation business unit. GE's latest previous locomotive deal was for 233 locomotives in South Africa last year.
GE plans to modify the company's existing Evolution line of diesel-electric freight locomotives design to meet the specifications needed by India's freight railroad infrastructure. The complete design of new locomotives must fit India's railroads which have the varied gauge of rail.
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