Photographer: Punit Paranjpe/AFP/Getty Images

India's $5.6 Billion GE, Alstom Deals Step Up Rail Overhaul

  • Both companies plan to build locomotive factories in India
  • Prime Minister Narendra Modi seeking to modernize rail network

General Electric Co. and Alstom SA won contracts worth $5.6 billion to build locomotives for India’s congested state-owned railway, as Prime Minister Narendra Modi strives to modernize Asia’s oldest network.

GE won a $2.6 billion deal for diesel engines and will invest $200 million to build a factory under a joint venture with Indian Railways. The goal is to produce 1,000 locomotives over 11 years. Alstom will make electric engines in a contract worth about $3 billion. The steps are among Modi’s biggest toward reversing chronic network under-investment and spurring manufacturing.

“Investment in rail infrastructure has been a topic in India for quite a long time,” Jamie Miller, who was appointed chief executive officer of GE Transportation in September, said in a telephone interview. The new deal “supports the modernization of the Indian railroads and it contributes to the local economy.”

Modi’s vision is to add track, world-class stations and bullet trains to spur the economy. India also plans to transport more freight, such as coal, on dedicated lines. The challenge is finding the money. The contracts follow the premier’s decision to open the doors to foreign investment in railroads last July, part of a push for an ambitious 8.5-trillion-rupee ($128 billion) revamp of the railway through 2020.

Industrial Focus

GE’s pact, the company’s largest-ever transportation deal, boosts the locomotive division that has become central to its business as CEO Jeffrey Immelt returns the company to its industrial roots. He’s shedding finance and consumer-focused divisions while bulking up the units making products spanning jet engines, oilfield equipment and gas turbines. The award is the largest in GE’s 100-year history in the country, Miller said.

Running costs from ferrying about 23 million passengers -- equivalent to Australia’s population -- and 3 million tons of cargo daily absorb most of the railway’s revenues, starving the network of investment.

India’s Railway Ministry said the new GE-built factory will supply 4,500-horsepower and 6,000-horsepower engines. The GE deal was announced Monday. Ministry spokesman Anil Kumar Saxena confirmed the contract for France’s Alstom on Tuesday, and said it’s worth more than 200 billion rupees.

GE aims to deliver its first locomotives in the second half of 2017, Miller said.

Fairfield, Connecticut-based GE has placed a particular emphasis on international and emerging markets with moves including the $10.6 billion acquisition of Alstom’s energy business, which closed last week. GE’s jet-engine unit said Monday that it signed a $16 billion services agreement with Emirates Airline.

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