Alstom India chugs along

Giving a kick to the “Make in India” project, the Indian Railways signed two rail contracts worth up to €3.7bn or around Rs.40,000 crore with Alstom India and General Elecric– a good sign of the country’s accelerating investment in its overloaded and outdated network. This is for setting a locomotive manufacturing factories in Madhepura and Marhaura in Bihar.

Alstom will make 800 electric locomotives, costing Rs.19,900 crore, to be delivered in phases over the next 11 years.

Morgan Stanley put out a report last week stating that 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. It has rightly pointed out that upgrading the entire system could cut logistics costs by a tenth, save up to 1.5% of GDP, boost trade by 5-6% and double the range of Indian products exported.

Little wonder then that Railway Minister, Suresh Prabhu stated that he plans to get investments to the tune of $137 billion in the ageing and congested railway network over the next five years. 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.

This order to Alstom and GE is the step first in this very same direction.

Alstom India stock price is up over 1.5% at Rs.597, going up over 3.5% during intra day. Its 52-week high stands at Rs.874.