Russian entry into India's rail sector

New Delhi: Facing a financial crisis aggravated by economic sanctions of Western Nations,  hopeful signs for the Russian Federation have emerged from India. The Indian Railways have issued the Letter of Acceptance to the joint venture of the Russian Transmashholding (TMH) and the Rail Vikas Nigam Limited (RVNL) to manufacture 120 sleeper variants of the 160 kmph Vande Bharat trains. The Russian company order constitutes the bulk of the Rs. 58,000 crore contract for the manufacture of 200 Vande Bharat trains - tenders for which were floated in April last year.

The accompanying contract to build 80  sleeper trains has been awarded to a consortium of Bharat Heavy Electricals Limited (BHEL) and Titagarh Wagons.

These trains are planned to be run as overnight trains, replacing the existing Rajdhani trains. In accordance with the tender conditions, these will be built at the existing railway facility at Latur in Maharashtra. The contract also envisages a 35-year maintenance clause.

In her budget speech in February last year, Finance Minister Nirmala Sitharaman announced plans to run 400 Vande Bharat trains in the next three years.

Russia's Entry

Russia has been India's traditional partner in the defence sector but will be making an entry into the country's rail sector for the first time. The Russian offer does not seem to do much harm to India in financial terms, as the TMH has quoted a price of Rs. 120 crores to build each of these 16-coach trains. The French Alstom had offered a quote of Rs. 160 crores, while the Swiss Stadler - with the Indian Medha Servo Drives as its Joint Venture partner - had quoted a price of Rs. 170 crores. The BHEL-Titagarh Wagons had initially quoted a price of Rs. 140 crores but has reduced the price to Rs. 120 crores to match the Russian offer. The tender conditions stipulated that the L-2 (second lowest bidder) consortium needed to match the rates offered by L-1 joint venture in order to qualify for the contract.

Titagarh-BHEL JV

So far so good. However, there are concerns too. The first of these relates to the situation that - with the exception of the Titagarh Wagons - the other players do not either have an enviable record in project development or have had no previous experience in India. The Chennai-based Integral Coach Factory ( ICF) had earlier awarded some contracts to the BHEL to build Electric Multiple Unit (EMU) and the Mainline Electric Multiple Unit (MEMU) trains but was reportedly unable to meet delivery schedules. Industry sources said that- in order to meet the tight deadlines on delivery of the Vande Bharat trains - the BHEL was likely to source the electricals from the Swedish ABB. BHEL's joint venture partner has, in any case, established a brand for itself. Titagarh has delivered coaches for the Pune metro and - in collaboration with the Chinese CRRC - is also engaged in rolling stock supply for the Bengaluru metro. In 2015, the Titagarh Wagons also acquired the Firema Tranporti, the Italian passenger and metro coach maker.

"We are confident about meeting the delivery schedules", said Umesh Chowdhury, Managing Director of Titagarh Wagons.

Opportunities for the Indian Industry

The TMH is Russia's largest manufacturer of rolling stock and railway equipment with customers in several East European countries but has had no presence in India. Its Indian partner, the RVNL, also has no previous experience in rolling stock manufacture, with the only silver lining being that the company has familiarity with the Latur factory; with the company having built the facility. In any case, there are apprehensions that the Russian company will find it difficult to meet the ambitious delivery schedules for the supply of these trains.

"The Russian company will probably need to depend heavily on the domestic industry. To that extent, bigger opportunities will emerge for India's rail industry", said former Railways officer Sudhanshu Mani - also known as the inventor of the Vande Bharat trains.