MC Interview | We will continue to invest in capacity building, ramp up export capacity from India, says Olivier Loison, MD, Alstom India

The Alstom India chief exuded optimism about future business prospects with Indian Railways, despite losing out on a Rs 30,000-crore contract for manufacturing and maintenance of 100 Vande Bharat train sets after the tender panel capped the bidding price at Rs 140 crore per set against his company’s offer of Rs 150.9 crore.

He pointed out that a production linked incentive (PLI) scheme will not only be a significant step to boost the manufacturing ecosystem of railway ancillary products in India but will also be crucial to secure private and institutional capital for mega projects.

Loison spoke to Moneycontrol about a raft of issues such as how the rail authorities could improve safety features to reduce accidents, which have become a major cause for concern for the government, along with his company’s ambitious capex plans for India.

Edited Excerpts from the exclusive interview:

What are Alstom's capex plans for 2024-25 and how much did it spend in the last financial year?

We are fully aligned with the Narendra Modi-led government’s vision of Make-in-India and Atmanirbhar Bharat.

We remain firmly dedicated to further strengthening our local sourcing and supply chain ecosystem. This commitment is evident in the investments to the tune of € 320 million till date.

In the last fiscal, our capex allocation was directed towards key projects. These included the Coimbatore Motor Project, the Combined Test Bench for 'type testing' and 'combined testing' of traction systems, the Sricity pre-serial smart line, the Solar rooftop plant at Maneja, and the inauguration of the Digital Experience Centre in Bengaluru.

We will continue to invest in capacity building and increase our export capabilities from India.

Similarly, our engineering strategy aims to raise the bar. At present, about 25 per cent of group engineering is done in India. However, plans are afoot to increase it to over 30 per cent in the coming years

When will Alstom be ready with the prototype for aluminium Vande Bharat sleeper coaches? 

Aluminium technology is set to enter the Indian market shortly. Unlike stainless steel, aluminium is increasingly being utilised in Europe, and we anticipate similar adoption trends in India in the near future.

We strongly believe that aluminium-based train sets will propel India into the future of efficient and sustainable rail mobility. We have completed the groundwork for establishing a local production ecosystem and have offered a competitive price for this innovation.

Indian Railways has cancelled the Rs 30,000-crore tender. However, with our strong local knowledge and investments in industrial and human capital over the years, we are well-positioned and committed to support the realisation of this vision (of the railways) in the future, should the opportunity arise.

What is the status of your current contracts with the Indian Railways and when are they expected to be completed?

In 2015, we signed a landmark €3.5 billion contract with Indian Railways to build 800 fully electric high-powered double-section locomotives, each with a capacity of 12,000 horsepower (HP) for freight services.

We are more than halfway through on our commitment towards the supply of these electric locomotives and their maintenance. As per the contract, we will be able to deliver the order by March 2028.

If the rail authorities exercise Option Clause and share an additional demand of another 200 electric locomotives, we can complete the delivery by March 2030. In the interim, we are also looking at various locomotive export opportunities and feasibilities.

Do you think that it's time that the government launches a PLI scheme to boost the manufacturing ecosystem of railway ancillary products in India?

India’s infrastructure requires substantial capital for the railways to complement the road infrastructure for both passenger and freight traffic. To achieve that, it is crucial to secure private and institutional capital for projects under construction.

Launching a PLI scheme will be a significant step to boost the manufacturing ecosystem of railway ancillary products in India. It will incentivise domestic production, attract investments, and enhance local capabilities, leading to a more self-reliant and robust manufacturing sector.

By encouraging companies to invest in manufacturing ancillary products, the government can help create jobs, foster innovation, and improve the quality of components used in railway operations. Additionally, a PLI scheme could enhance competitiveness, reduce dependency on imports, and support the 'Make in India' initiative.

Safety in the Indian Railways has come to the forefront in the last few months. In your international experience, what can the Indian government learn from foreign countries to improve safety in railway operations in India?

Safety in mobility is paramount, and we share the Indian government's commitment to ensuring the well-being of every passenger. The Indian government has intensified efforts to modernise its extensive railway network to make it more efficient, safe and reliable. We believe that integrating global best practices with local expertise is key to achieving the highest safety standards.

For instance, Kavach is a good starting point. Safety is an area where there is a need for constant innovation and improvement. Any system needs to evolve with continuing improvement of features, system wide availability, and standardisation/interoperability across vendors.

It's important to focus on achieving the intended benefits of Kavach. Consequently, necessary changes, additional investments, and amendments to policies and regulations will have to be made promptly.

Is Alstom planning to invest in the railway safety segment in India?

We are  deeply invested in advancing railway safety and modernisation in India. We recognise the government's commitment to safety upgrades, including nationwide implementation of train protection systems, modernised maintenance, and enhanced passenger amenities.

The company has been at the forefront of introducing advanced technologies and solutions to enhance railway safety. We built the rolling stock and signalling solutions for the newly inaugurated Namo Bharat project, India’s first semi-high-speed regional rail service.

Also, we are significantly investing in railway safety and modernisation in India through various initiatives. For example, our newly launched Digital Experience Centre in India, is focused on developing next generation signalling solutions. This Centre aims to advance the safety and efficiency of railway operations through innovative digital technologies.

In the last few years competition in the Metro segment in India has risen significantly. Which major orders are you targeting in the coming year?

The Metro market is buoyant, with two-four big projects coming up every year. This trend will persist  for the next five years. With an increase in growth of infrastructure, Tier-II and III cities will have Metro networks in the next 10 years.

We view this increased competition positively as it drives innovation, improves quality, and eventually benefits the end-users by providing more efficient and advanced transportation solutions.

We enjoy a strong presence in the country, due to the 'Make in India' initiative and our high-level of localisation, which has reached 70 per cent and 90 per cent for Metro and 90 locomotives, respectively.

What is the size of your current orderbook and by when will it be executed?

Over the past two years, we have secured orders worth over €3 billion euros from the Asia-Pacific region, accounting for 17 per cent of our total annual turnover.

The momentum remains strong. Till the last fiscal, the region had a strong pipeline of €19 billion, with India as one of our major contributors.

What is your current annual manufacturing capacity in India for locomotives and what is the capacity utilisation of your facilities? Are you looking at any capacity expansion in the coming years?

We are producing about 100 electric locomotives a year and across our two factories, we have a combined manufacturing capacity of 700 cars annually.

We have mature export capabilities in the Metro segment. With experience of engineering and manufacturing electric locomotives in Madhepura, Bihar, we are confident in our capability to export locomotives from India.

India is the third-largest market for us and has witnessed exceptional growth, supported by the rising urban mobility market and a strong relationship with Indian Railways.

With the recent announcement of Metro and NaMo Bharat expansion, three major railway corridor programme and transformation in existing rail ecosystem, we are confident that it will create further opportunities for us to introduce world class rolling stock, rail equipment and infrastructure, signalling and services in India

What is your expectation for how the rolling stock industry in India will grow over the next two to five years? 

The future of railways and Metro rail systems in India is incredibly promising.

Prime Minister Narendra Modi unveiling and laying the foundation stone for numerous railway projects worth Rs 85,000 crore, we are set to witness a remarkable acceleration in the urban mobility space. Ensuring standardised project timelines will be instrumental in fast-tracking development and initiating commercial service.

In 2022, Alstom won contracts from Madhya Pradesh Metro Rail Corp and Delhi Metro Rail Corporation for Metro cars? When will the first Metro cars for these projects be supplied? Which other Metro projects are you targeting in the next few years?

We have commenced the production and delivery of ultramodern trains for the Bhopal and Indore Metro projects. Designed in a record time, these trains are being manufactured 100 per cent indigenously, at our facility in Savli, Gujarat.

This order also includes installation of the latest generation of Communications Based Train Control (CBTC) signalling system as well as train control and telecommunication systems. The revenue service initiation is expected to commence this year.

Delhi Metro Phase-IV is being equipped with our scalable CBTC solutions, which will operate in conjunction with its Automatic Train Supervision (ATS) system. We are also manufacturing 312 standard gauge Metro cars for the Phase-IV expansion and the first train set is expected to be delivered by this September.