Japanese major Hitachi Rail, which has bid for a signalling contract in the Western Dedicated Rail Freight Corridor project, is looking to tie up with Indian firms in the manufacturing and technology space. At a time when India is seeking foreign direct investment (FDI) for rail-based projects, the company wants to focus on projects that have a high probability of getting implemented. In a telephonic interview with Businessline correspondent (Courtesy: BusinessLine), Alistair Dormer, Hitachi Rail’s Global CEO, spoke of the firm’s plans in India and how private investments are getting routed into high-speed rail projects. Edited excerpts:
What are Hitachi Rail’s current operations in India?
At present, we have a relatively small team in Delhi and its mission is to fully understand the Indian railway market. We are hiring more people in India and bidding for contracts, including the Dedicated Freight Corridor. We have bid through a consortium for two signalling and telecommunication equipment packages in the Western Corridor project. The commercial bid was submitted in December; hopefully, we will know the outcome by March end.
Are you are looking at any other projects?
We are looking at monorail projects, high-speed and Metro projects in India. We are in discussions with a number of potential partners. There are many projects coming up; the first step is to complete the freight corridor contract, and then bid for rolling stock and signalling jobs.
Which are the partners you are tying up with?
We are looking at local manufacturing and technology companies, as well as building relationships with infrastructure firms.
In India, do you intend following your model in the UK intercity high-speed rail space through Agility Trains, which involved private financing?
Our approach is to have a wide range of capabilities. If the (Indian) government wishes to buy, it’s okay. If private companies are involved, it is okay. If the government looks to involve private financing, then Hitachi has the capability to bring that in to fund or invest in new transportation schemes. At the moment, we are still discussing with the (Indian) government what will be the best approach. And we are giving them the example of how we have used private finance in the UK to invest in projects. It is up to the national and local governments to decide what is best for them.
What was the structure of the UK project?
Private financiers are funding the construction of either a new line or the rolling stock. There is a long-term contract with the government transport department to pay for the assets, on an availability basis. If a new line or rolling stock is available for use, then a daily fee is paid. However, in this case, the financiers do not take the risk of how many passengers are using the train. It is up to the government or the operator to manage that risk. In effect, a financier puts in the money for a long-term contract to supply rolling stock to the government or the private operator.
Also, the government has a separate competitive bidding process to decide on the private operator. After seven years, there will be a competition on who will be the train operator. We have two different operators for two different inter-city high-speed lines.
Recently, India has invited foreign direct investment in rail-based projects. Any thoughts on this?
We are continuing to engage with the (Indian) government and the authorities to assess the probability of each project because there have been discussions around infrastructure investments in India, of which some have happened and some have not. We need to focus on projects that have a high probability of happening.
If you get the signalling contract, will you set up a manufacturing unit in India?
We don’t need to set up a manufacturing base in India for signalling equipment. However, wining the contract will be a catalyst to expand our base in India. We are looking at having partners to manufacture signalling and rolling stock equipment. It is very important for companies coming in to India to have a contract. We have joint ventures in China to manufacture the electric traction and some other equipment, but that is for the Chinese market. We are looking for potential partnerships to manufacture rolling stock in India.
Is your proposal of setting up a plant in India subject to first getting a contract here? Or are you looking to use India as a base to service other countries in the region?
When we got the first contract in the UK, we supplied from the manufacturing plant in Japan. When we got the second one, we set up a factory in the UK to make trains. Now we have a manufacturing plant for the European region.
If the Indian market develops well, and Hitachi gets business in India and sees a long-term pipeline of projects, then India will be a good place to set up a unit, either on our own or through a joint venture. So, it basically depends on the project pipeline in India and the region.