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Road and Rail

Alstom wins €3.7bn India rail contracts

Victor Mallet
Martin Leissl | Bloomberg | Getty Images

Alstom, the French engineering group now focused on transport, has won two rail contracts in India worth up to €3.7bn in the latest sign of the country's accelerating investment in its overloaded and outdated network.

Alstom will invest €200m in a project to make and maintain electric locomotives for some €3.5bn over 17 years. It will take a 74 per cent stake in a joint venture with Indian railways to make the 800 machines in the state of Bihar.

Solving India's infrastructure deficit

The French company, which already has contracts for metro systems in several Indian cities, also signed a €200m contract to provide the electrification, signalling and telecommunications for a portion of a "dedicated freight corridor" between Delhi and the eastern port of Kolkata (formerly Calcutta).

More from the Financial Times:

GE and Alstom set for India rail contract
India plans $137bn rail investment
Brussels clears $14bn GE-Alstom deal

India's plan to buy new locomotives and build more track has been negotiated since 2007, but the election of Mr Modi's Bharatiya Janata party government last year accelerated the process.

"There is a new momentum, that's clear," said Henri Poupart-Lafarge, Alstom's president for transport, shortly before a signing ceremony in New Delhi. India, he said, was progressively becoming the centre of Alstom's Asian footprint, and Alstom was poised to more than double its 1,500 employees in India.

GE of the US, Alstom's former partner, is the other big foreign winner so far in India's rail expansion plans under Prime Minister Narendra Modi. GE is investing $200m to make and maintain 1,000 diesel locomotives in a contract worth $2.6bn over 11 years — the largest deal in the company's century-long history in India.

Jeff Immelt, GE chairman, said during a visit to India before the deal was finalised that he had been personally involved five times in bidding on a programme to modernise the Indian rail network. "This is the first time I actually think it's going to take place," he said.

Suresh Prabhu, Mr Modi's railways minister, predicted "immense gains" to the Indian economy when he revealed plans this year to invest $137bn in the ageing and congested rail network over the next five years, a near-quadrupling of the rate of spending. He aimed to increase passenger capacity to 30m a day, increase track length by a fifth to 138,000km and raise freight capacity by half to 1.5bn tonnes a year.

In an interview last week, Mr Prabhu boasted that the new freight corridors linking Delhi to Mumbai in the west and Kolkata in the east would be finished in three to three-and-a-half years. He acknowledged the idea was eight years old but added: "It was started on paper. We made it actually happen on the ground."

According to a report published a week ago by Morgan Stanley, India's rail network was 2.3 times as big as that of China in 1951, but China's today is 1.6 times the size of India's following massive Chinese investments.

A "right-sizing" between Indian road and rail through railway upgrades, Morgan Stanley said, could cut logistics costs by a tenth, save up to 1.5 percentage points of gross domestic product, boost trade by 5-6 per cent and double the range of Indian products exported.