Commuters board a train during the morning rush hour at Kurla railway station in Mumbai, India, on Wednesday, April 15, 2015. India's economic growth will power past China's for the first time since 1999 this year, according to the International Monetary Fund's World Economic Outlook released Tuesday. Photographer: Dhiraj Singh/Bloomberg
In train: Indian Railways plans to commercialise 400 of roughly 8,000 railway stations which cater for 27m travellers each day

GE Transportation, a division of General Electric of the US, and Alstom, the French engineering company, are frontrunners to win multibillion-dollar contracts to build and sell train locomotives as part of India’s ambitious railway modernisation programme, officials familiar with the bidding process said.

The two companies have been selected from a shortlist of seven — which included Bombardier, Siemens and Electro-Motive Diesel — to supply at least 1,800 diesel and electric locomotives over 11 years from two factories that are due to be built in the Indian state of Bihar, the officials said.

They declined to give financial details of the bids, which remain subject to final confirmation. Nevertheless, executives at Indian Railways, the state-owned rail authority, estimated that the total investment needed to build the factories could be as much as $3.4bn for an electric locomotive plant and $3.1bn for a diesel locomotive plant.

The initiative to lure multinational engineering companies to India to make advanced locomotives is part of a broader initiative to modernise the country’s congested and creaking railway system.

“This is the most ambitious rail modernisation project in decades,” said Suresh Prabhu, India’s minister of railways, in an interview. “These [manufacturing] projects will bring the best rail technology to India and show that our ‘make in India’ programme is not a dream,” he added, referring to a national policy to boost manufacturing investment.

The two factories are due to be built as public private partnerships, with Indian Railways contributing land and some facilities for a 26 per cent share in each plant; GE Transportation and Alstom will take the remaining 74 per cent stakes. Indian Railways is set to buy locomotives produced at each of the plants.

1,800

Number of diesel and electric locomotives to be produced over 11 years from two factories

The diesel locomotive factory, likely to be operated by GE Transportation, is expected to supply 1,000 locomotives, Indian Railways executives said. The electric locomotive plant, expected to be run by Alstom, is to manufacture 800 train engines.

In addition to the plan to manufacture advanced locomotives, India also intends to commercialise roughly 400 of its 8,000 or so railway stations, selling long-term leases to companies to operate shopping malls, restaurants, offices and other businesses on station premises, Mr Prabhu said.

“About 27m people travel by train every day so you have a lot of people passing through the station ready to buy things,” he said. “In Japan, more than 30 per cent of the income of railways comes from the non-rail business, but in India this is only 2 per cent at the moment.”

Mr Prabhu also reiterated that the “dedicated freight corridor” project, under which India plans to build two new rail lines for freight from Delhi to Mumbai and Delhi to Kolkata at a total cost of $12.5bn, would be finished by 2019.

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