French engineering group Alstom recently secured two major contracts from the Indian railways. This could see the company double its workforce in the country, according Alstom's president for transport, Henri Poupart-Lafarge.
Both the contracts together are worth about €3.7bn (£2.6bn, $3.9bn). The bigger contract involves manufacturing and maintaining 800 electric locomotives for about €3.5bn over 17 years. The French group will invest €200m for this project in the north Indian state of Bihar. The project will be a joint venture between Alstom and the Indian railways. The locomotive company would hold 74% stake in the venture.
The smaller contract valued at about €200m will require Alstom to provide signalling, electrification and telecommunications equipment for a portion of a dedicated freight corridor, between the eastern port of Kolkata and Delhi.
These are not the first contracts for the Levallois-Perret-headquartered company. It has previously worked on metro systems across many Indian cities.
"There is a new momentum, that's clear," Poupart-Lafarge said, adding that the country was becoming the centre of Alstom's Asian footprint.
In November, Alstom's former partner, General Electric, had announced that it had won a contract to develop and supply 1000 locomotives over 11 years in India, which has the world's largest rail network, for about $2.6bn (£1.7bn). This was the largest deal for GE in India over its 100-year-old association with the country.
The Indian railways has been due for an upgrade for quite some time and has received a lot of attention under Prime Minister Narendra Modi, with Railways Minister Suresh Prabhu promising to spend about $137bn for its modernisation over the next five years.
As part of the commitment, the Indian government had allowed 100% FDI in certain railway businesses last year. Prabhu had previously stated his intention to hike passenger capacity to 30 million a day apart from increasing track length by 20% and raising freight capacity by 50% to 1.5 billion tonnes a year.
According to Morgan Stanley, a "right-sizing" between Indian road and rail through railway upgrades could facilitate:
- Reducing logistics costs by a tenth
- Saving up to 1.5% of gross domestic product
- Increasing trade by 5% to 6%
- Doubling the range of Indian products exported