The country’s largest engineering and manufacturing company, Bharat Heavy Electrical (Bhel), along with the

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US-based General Electric, is planning to seek the railway ministry’s approval for setting up a locomotive factory in Bihar.

“We see a big opportunity in Indian Railways’ scrapping the bidding for locomotives supply contract in Bihar. This could be a big risk. The company has expressed its willingness to the government to take a financial risk by setting up a locomotives factory on its own,” K Ravikumar, chairman and managing director of Bhel told Financial Chronicle.

Indian Railways had planned to set up two locomotive factories and one coach factory in Bihar on the public private partnership (PPP) basis. However, the plans were abandoned in February as the railways received only one bid for each project. The Bhel-GE consortium was the sole bidder for the railways’ diesel locomotive plant in Marhowra, Bihar. The consortium is expecting to sign a formal agreement with the railways in the second half of 2009.

Railway ministry officials, however, denied any move to go for a private company participation in the project. “As of now, there is no plan to get back to the PPP model or get it wholly developed by the private company. It is not possible, at least till the elections are over and the new government is in. If the new government wants to revisit the project, it can opt for private investment again,” said a senior ministry official on condition

of anonymity.

The railways is now planning to turn the factories into fully-owed departmental production units. The present plan may hit the finance hurdle because of significant increase in the project cost.

The railway official said that it was in the

best interests of the railways to go for private partnership. “The ministry will require Rs 4,800 crore to set up three factories on its own. If the private players participate, the railways with the 26 per cent stake will have to shell out only Rs 300 crore,” the official said.

The railways is still exploring options to bring in private investments for other work related to the project.