The Centre’s railway electrification policy seems to have backtracked quite a bit in the recent past. The ruling BJP dispensation, especially the railways, is in the horns of a dilemma over how to deal with its idea of switching to electric locomotives, rejecting any fresh addition to its diesel locomotive stable.

The policy decision looked good on the drawing board, what with the railways’ energy bill at a humongous Rs 32,000 crore a year of which diesel burning Rs 20,000 crore.

The ambitious plan stems from the idea that Indian Railways has now decided to electrify 4,000 km route in the current fiscal instead of the earlier target of 2,000 km. This change in plan is new Railway minister Piyush Goyal’s idea.

With the new idea in mind, the Railways recently signed its first Engineering, Procurement and Construction (EPC) contract with engineering major Larsen & Toubro. The Rs 1,050 crore contract is for electrification of 781 route kilometres (RKM) and was awarded by the Central Organisation for Railway Electrification (CORE) and Konkan Railways.

The sticking point, however, was a huge diesel locomotive factory in Bihar. This was a political move, obviously meant for appeasing Chief Minister Nitish Kumar before the split with Lalu Prasad Yadav happened. With Goyal’s electrification idea gaining traction, the huge diesel locomotive plant push seemed redundant. The immediate losers were Bihar and the US firm General Electric, who was to build this huge project.

Earlier this month GE wrote a mail to the railway ministry, warning Indian officials that scampering the $2.5 billion deal would harm job creation. On the lines of such statements, the firm had also warned of the reaction this would have to the overall investment scenario. The latter part was, of course, unimportant to India, but the fact that a committed project with a US firm was to have been jettisoned, sent alarm bells ringing. Lalu Prasad Yadav was suddenly in a position to take this to the people as an anti-poor move.

GE had said that changing this scheme would “undermine one of the most promising infrastructure projects in the country”. It had also warned that this would draw “substantial fees associated with this project”.

The project is a lifeline for a GE, whose locomotive division is in a bad shape. The Bihar plant is to make 1,000 locomotives in a year. GE does not make electric engines.

Meanwhile, Siemens AG and Alstom SA have just agreed to merge their rail businesses. The German and French arch-rivals will now have a huge conglomerate to fight Chinese competition. With India unlikely to plump for Chinese-made electric locomotives, this was the best option available to Goyal.

But the GE pressure seems to have worked. Goyal has just said that diesel engines are welcome. How that fits into his electrification drive is not clear, but railways will have to stay in the shadow of politics for a long while yet.

—India Legal Bureau