Infrastructure: Metro Makers
The names, Bombardier and Alstom might as well be adjectives in the English language, to describe anything that is gigantic in size, stature and the work it undertakes. For starters, both the companies have footprints in several global large-scale infrastructure projects. Specifically in India, the Indian arm of Bombardier Transportation and Alstom Transport will together cross the $1 billion mark in revenues. In fact, Bombardier India says the company alone will cross $1 billion in revenue by 2020-21.
It is no secret that Indian urban transportation will soon need to procure around 3,000 metro cars, 25-plus signalling lines, 5,000 EMUs (electric multiple units), nine high speed lines and 20 semi-high speed lines in the next 60 months. Of course, the requirement will be well supported by a network of advanced signalling systems and a regular supply of propulsion equipment for electric locomotives and EMUs to Indian Railways. That is why Bombardier Transportation India, the rail equipment division of the $16.34 billion Canadian firm Bombardier, and Alstom Transport India, part of the $8.3 billion French multinational operating worldwide in rail transport markets, have made long-term investments in India. Bharat Earth Movers (BEML) is the only Indian rolling stock manufacturer and is at the third position in terms of marketshare. It operates as a consortium with Hyundai Mitsubishi Rotem.
Rail Orders
Bombardier India has a manufacturing facility in Savli (Vadodara, Gujarat) that not only makes metro coaches for the Indian market but also exports ‘Made in India’ metro cars overseas. Rival Alstom Transport has a fully-functional manufacturing base in Sri City (Andhra Pradesh) that just delivered the now operational Kochi Metro. It is also manufacturing metro cars for Sydney Metro.
Between the two big metro makers lies a lion’s chunk of India’s existing metro rail orders and those placed by the Indian railways. Sample this: Bombardier is currently manufacturing 450 commuter cars for the Queensland New Generation Rollingstock (QNGR) project for Australia. The company is Delhi Metro’s largest supplier of signalling systems and rolling stock with more than $1.2 billion worth of orders placed since 2007. The Canadian firm’s India arm has also delivered 614 Bombardier Movia metro cars with an additional order of 162 metro cars recently received from Delhi Metro, making it one of the largest operating fleet in the world for Bombardier. In the last two decades, Bombardier has invested over $100 million in Indian manufacturing sites, people, engineering, local supplier network and proven technologies.
Alstom India, too, for its part, will be investing over Rs 250 crore in India over the next few years. It has already won a Rs 20,000-crore project from the Indian Railways, the first major FDI project in railways under which the company will manufacture 800 high-power electric locomotive (to haul freight trains at twice the existing speed) at Madhepura Locomotive Factory in Bihar over the next 11 years. The first such locomotive will be put on trial early next year. As part of the deal, a total of five such locomotives will be assembled at the factory by 2019, and rest will be manufactured as per the ‘Make in India’ initiative.
“The project is running on course and we are looking forward to delivering the first locomotive from our new factory in Madhepura early next year,” says Bharat Salhotra, MD, Alstom India.
“Tier-2 cities such as Visakhapatnam, Ahmedabad, Nagpur, Pune, Varanasi and several other cities are aspiring to have their own metro network. There is a huge opportunity in India,” says Harsh Dhingra, Chief Country Representative, Bombardier Transportation India. However, apart from the infrastructure plan, what has worked for these companies is the recent changes implemented in the norms for metro cars manufacturing. According to Dhingra, for any future metro rail projects, at least 75 per cent of the cars will need to be manufactured in India. “Which means good news for manufacturers like us who have made the necessary investments and have a functional manufacturing facility,” adds Dhingra.
Metro Rail Mania
India has seven operating metro systems having a total network of 346 km. This will be doubled in the next three years, M. Venkaiah Naidu, the Union Minister for Urban Development said recently. By 2020, Naidu, if officially appointed, would also have completed almost three years as the country’s Vice President (Naidu, 68, has filed nominations for the post at the time of filing the report). Earlier in July, the BJP veteran had said that under the last three-year rule of BJP-led NDA government, the Centre has approved over Rs 4.13 lakh crore for improving basic urban infrastructure, several fold more than the previous UPA government’s 10-year tenure.
At present, metro rail constructions are being carried out in Lucknow, Kanpur, Ahmedabad, Nagpur, Noida/Greater Noida and Pune while it is operational across Delhi, Kolkata, Jaipur, Bengaluru, Chennai, Kochi, and Mumbai. Analysts at Axis Capital estimate India will award construction of 650 km of track worth $30 billion over the next 60 months.
Alstom India claims to have virtually doubled its revenue every financial year since the past five years. By that estimate, it may have closed the last financial year at over Rs 1,200 crore-1,400 crore while rival Bombardier may soon cross Rs 2,500 crore of annual revenue from its India operations alone. And why not? In 2016, in Berlin, Bombardier Transportation President Laurent Troger announced that the company is looking at generating $1 billion in revenue from its India operations. “Yes, ...we are working actively on achieving $1 billion revenue from India in the next five years from the present level of $300 million,” Troger had said.
But can they achieve these numbers? Apart from the upcoming work to be generated from metro rail projects, Indian Railways mega modernisation projects are also whetting the appetite of global rail manufacturers like Bombardier, Siemens, Alstom, China Railway Rolling Stock Corporation among others. These players are now interested in bagging mega-projects of Indian Railways like the one proposed at Kanchrapara in West Bengal where the winning firm/consortium will have to set up a manufacturing facility to produce around 5,000 EMU coaches over the next 10 years. The project size is estimated to be around $4 billion-5 billion says Dhingra.
What are EMU coaches? An EMU coach runs without a traditional locomotive and is used generally on local routes. Simply put, an EMU is a multiple unit train consisting of self-propelled carriages using electricity as the motive power. An EMU requires no separate locomotive, as electric traction motors are incorporated within one or a number of the carriages. These modern coaches will ensure that local and mainline train services become faster and more comfortable.
Advantage India
What is it about India that both Bombardier and Alstom have invested hundreds of crores? Does increased localisation reduce cost? According to Alstom’s Salhotra, proximity to the market is extremely important for manufacturing and innovation, even though the costs may only dip marginally. Alstom, which has supplied metro cars to Lucknow, Chennai, and Kochi, has upped the level of localisation with each of the projects. “For the Chennai Metro, the level of localisation was around 30 per cent, for Kochi Metro it moved up to 60-65 per cent and for the Lucknow Metro, it increased to 70-75 per cent,” says Salhotra. “The fact that we are doing the designing and engineering locally holds the key,” he adds.
Salhotra also points out that increased localisation is not about bringing down the cost. “It isn’t just about the cost. It is about innovation. You cannot sit in France and develop locomotives for India. Proximity to the customer is very vital in designing coaches,” says Salhotra. As a company, Alstom has practiced the ‘Make in India’ philosophy for a long time. “All our projects are true of the fact that we have actually endorsed the philosophy by localising the supply chain and manufacturing and in the process creating lots of jobs,” he adds.
Bombardier India’s Dhingra too is a great fan of manufacturing in India. And he has his reasons “I call India the best cost country and not a low-cost country because then that implies it is cheap, which it is not,” he explains. Dhingra says in terms of skills, India and Europe are similar. “Since the labour is coming at a lower cost here, we are competing with the international market. Being the best cost country, we will be able to manufacture at a cost lower than what we make in Europe, that is an advantage,” says Dhingra. “The quality remains unaffected because whether it is a Bombardier plant in India or in Europe, quality of the train and the output is almost the same. The only difference is the cost. If however, the prices go up elsewhere then the impact will be felt here for sure,” he adds.
But not everything is perfect in Indian conditions. Salhotra points out the disadvantages of not having any standardisation in metro coach construction. Metro rail lines here are composed of both standard gauge and broad gauge. For instance, Delhi Metro used broad gauge for their earliest lines but most new projects are on standard gauge. Why? Because the rolling stock gets imported from Europe which is on standard gauge. Ahmedabad Metro may be an exception as it will use broad gauge hence there will be more space available inside the coach. “Rail industry is very unique since there has been no standardisation. The government has recently started the move of standardising the metro which is a very good,” says Salhotra.
But how does this impact the manufacturers? Every train is different hence the manufacturers have to design every train from scratch. “The pantograph (apparatus on the top of the train to collect power through contact with an overhead catenary wire), the height and width of the trains, the cooling and lighting system — everything requires fresh designing because of different gauges. Now, a city like Kochi which requires only 75 cars, if we do not have a standardised train, we have to build again and that makes it super expensive because cost of designing a train is huge,” Salhotra adds. We can’t afford to have unique designs of metro coaches for every city,” he says.
Whatever may be the case, the fact that global rail manufacturers are well-entrenched in India and are cashing-in on the rapid enhancement in urban transportation speaks volumes of the business and employment opportunities that the new India is throwing up.
