ALO Alstom

By Sean McLain and Niharika Mandhana 

NEW DELHI--Indian Railways signed two long-stalled, multibillion-dollar deals for freight locomotives this week, with France's Alstom SA and General Electric Co. of the U.S., that are part of a broader push by the country to improve infrastructure and drive industrialization.

Under the agreements, Alstom and GE are to build hundreds of locomotives in India in partnership with Indian Railways, giving a boost to Prime Minister Narendra Modi's efforts to increase domestic manufacturing and help India close a yawning development gap with its East Asian neighbors.

"These are huge projects," said Amitabh Kant, who oversees Mr. Modi's "Make in India" campaign.

The deals were years in the making, and detailed contracts still need to be finalized. Alstom and GE are to own 74% of their respective joint ventures with Indian Railways, which will hold 26% stakes in the companies.

Alstom is to build 800 electric locomotives for $3 billion; GE is make 1,000 diesel locomotives for $2.6 billion. Both are to deliver the engines over about a decade.

The projects, conceived of nearly a decade ago, fell prey to bureaucratic indecision, with the government worried the railways wouldn't be able to upgrade and expand quickly enough to use all the new locomotives, according to a senior Railway Ministry official, who declined to be named.

GE Chairman Jeff Immelt, who has long seen India as an important market, had pushed hard for the deal, expressing frustration with delays in 2011 and saying, half-jokingly, that if he couldn't get it done before he retired, "my own self-worth would be diminished immensely."

Banmali Agrawala, the head of GE's India operations, said Tuesday: "Twice or thrice it started, and couldn't be completed for whatever reason," adding: "We've been through some painful moments. I'm glad it's over."

Prime Minister Modi, who took office last year, has pledged to cut red tape, modernize infrastructure and boost India's economy. The government has eased limits on foreign investment in businesses ranging from defense to insurance.

Mr. Modi's approach so far has been largely an incremental one. For example, he has preferred efforts to make mammoth state-owned enterprises like Indian Railways, Coal India and the country's largest banks perform better under government management than to privatize them.

Partisan fighting in India's Parliament has slowed progress on a constitutional amendment aimed at simplifying the country's patchwork tax system. And, wary of alienating rural voters, Mr. Modi over the summer gave up on efforts to ease a strict land-acquisition law.

With an economy that is among the world's fastest-growing, India is succeeding in its efforts to attract more foreign capital. In the first six months of this year, India recorded $19.4 billion in foreign direct investment, up 30% from the same period in 2014.

Foxconn, the Taiwanese manufacturer of iPhones, said in August it would spend $5 billion to build factories and research sites in the western state of Maharashtra. India aims to increase manufacturing to 25% of gross domestic product by 2022, from around 18% today.

The government is eager to tap outside investment and expertise t o help Indian Railways, a state-run behemoth that employs 1.3 million people, to move goods and people faster and more reliably.

This week's locomotive deals are part of a $128 billion plan to upgrade the creaking infrastructure of India's railway network that transports 23 million Indians every day.

"Where there is infrastructure, the pace of development quickens," Mr. Modi said last week at a ceremony to lay the foundation stone for a highway project.

Write to Sean McLain at sean.mclain@wsj.com and Niharika Mandhana at niharika.mandhana@wsj.com

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(END) Dow Jones Newswires

November 10, 2015 08:41 ET (13:41 GMT)

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