On the table: mega deals in defence and railways

New Delhi: An American company is set to bag a Rs 30,000-crore project to build locomotives for the Indian Railways, a much-delayed mega-deal that is likely to be catalysed by the visit of President Barack Obama next month. The Obama visit is also expected to see the signing of the largest ever defence agreement between India and the US.

On the basis of technical bids, two US firms, General Electric (GE) and Electro Motive Diesel (EMD), have been shortlisted to set up the Diesel Electric Locomotive Factory at Marhowra in Bihar's Saran district, one of which will bag the multi-billion dollar contract when financial bids are opened in December.
The company will build 1,000 mainline diesel electric locos -- engines in which diesel is the prime mover -- over 10 years, and provide maintenance support over a period of time in a public-private partnership with Indian Railways, with the latter holding 26 per cent stake. The factory is estimated to cost around Rs 2,052 crore to build, with the cost of producing 1,000 locos and their maintenance likely to add up to another Rs 15,000 crore and Rs 10,000-odd crore respectively, said railway sources.
The Railways will provide the land, leasing it to the joint-venture company for around 50 years. The government had originally fixed November 30 as the deadline for selecting the joint-venture partner, and December 31 for signing the contract.

Diesel Locomotive Works (DLW), Varanasi, is currently the only supplier of diesel electric locos to the Railways. DLW manufactures around 150 locos annually, even as increased freight and passenger operations have been pushing up demand.
On the defence front, despite India's reluctance to sign three 'foundation agreements' being pushed by the US, decks have been cleared for the signing of a mega contract to procure 10 C17 Globemaster III heavy transport aircraft through the Foreign Military Sales (FMS) route. While the value of the deal will be revealed only after the formal signing, an official notification to the US Congress has revealed its potential value to be a massive $5.8 billion -- well over double the value of the $2.2 billion deal that has been signed to procure eight P8I maritime reconnaissance aircraft, also under FMS, the government-to-government method for selling US defence equipment.
India is also likely to order an additional four P8I aircraft during Obama's visit, pegged at $ 1.1 billion. Another 'feelgood' deal that will be discussed during the visit is the procurement of nearly 100 GE 414 engines built by the US giant GE Aviation, to power the Light Combat Aircraft (LCA).
Defence Ministry sources, however, said there was no change of stance on the two defence agreements the US is pushing -- CISMOA (Communications and Information Security Memorandum of Agreement) and BECA (Basic Exchange and Cooperation Agreement for Geo-spatial Cooperation).

While Defence Minister A K Antony told his US counterpart during his recent Washington visit that the agreements are being studied by various agencies, sources said there is stiff resistance from the armed forces, who see the agreements as being restrictive.
CISMOA is being sold as an agreement that will give access to high-end communications technology to India. "But the armed forces do not see any benefit in procuring all communications equipment from a single source. They want to diversify and not be dependent on a particular source for equipment that can be easily procured from a variety of nations," said a top defence ministry source.
BECA is seen as being intrusive -- signing the agreement would mean allowing US officials access to map sensitive terrain. While satellite mapping is not a concern, BECA would entitle US officials to use ground-based equipment to map out terrain.
Source: The Indian Express