• By Nidhi Giri
  • Mon, 21 Oct 2024 02:09 PM (IST)
  • Source:JND

During Prime Minister Narendra Modi’s visit to Kazan this week, regulatory and technical hurdles impacting a $6.5-billion joint venture project for building Vande Bharat trains by Russia’s Transmashholding (TMH) are expected to be raised by Moscow. Russian engineering major TMH is executing the project in a joint venture with state-run Rail Vikas Nigam Ltd (RVNL). The Russian side raised issues holding up the project during Modi’s visit to Moscow in July, and they are expected to figure again when the Indian leader travels to Kazan on October 22 to attend a BRICS Summit, four people aware of the developments said, as quoted by a Hindustan Times report.

PM Modi is set to meet Russian President Vladimir Putin on Tuesday on the margins of the BRICS Summit. The two leaders last met for an annual bilateral summit in Moscow during July 8-9. Putin said in September the upcoming meeting will be an opportunity for both sides to take stock of ongoing initiatives.

A consortium of RVNL and TMH has faced several problems since it won the bid for the Rs 58,000-crore tender in March 2023 to manufacture and maintain 200 Vande Bharat trains at the then estimated cost of Rs 120 crore per train set. Subsequently, the government trimmed the contract from 200 sets to 120, reducing the total project size to Rs 36,000 crore, the people said on condition of anonymity.

Later, the government put on hold the consortium’s request for changing shareholding structure in the special purpose vehicle (SPV) Kinet Railway Solutions Ltd. The share swap was proposed only among related Russian entities without in any way affecting RVNL’s equity stake, they said.

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Spokespersons of RVNL, Kinet Railways Solutions, Prime Minister’s Office and ministries of external affairs, railways and finance didn’t respond to an email query on this matter. A delegation led by senior TMH officials visited New Delhi in September for meetings aimed at addressing the hurdles holding up the project. The Russian team subsequently visited Maharashtra, where the project is to be located, during September 18-19, one of the people said.

“The SPV has three equity partners – RVNL and two related Russian entities. The request is for a change in shareholding structure among the two existing Russian companies, apparently to avoid Western sanctions. The regulatory approval is pending for long, without citing any particular reason," a second person said, as quoted by HT.

TMH is among Russian entities that have faced US sanctions in the aftermath of Russia’s invasion of Ukraine in February 2022.

According to a press note issued by RVNL on July 29, 2023, and documents in the public domain, Russian entities Metrowagonmash (MWM), a subsidiary of TMH, and Locomotive Electronic Systems (LES) and India’s RVNL formed SPV Kinet Railway Solutions Ltd and signed a shareholding agreement to manufacture Vande Bharat train sets and provide maintenance services for 35 years.

RVNL held a 25 per cent stake in Kinet Railways Solutions, while MWM and LES had 70 per cent and 5 per cent stakes, respectively.

“Later, the Russian entities approached the government to change the shareholding of MWM from 70 per cent to 5 per cent and LES from 5 per cent to 70 per cent, without affecting the equity stake of RVNL,” the second person said.

While the government’s approval is awaited for change in shareholding of the Russian entities, a new issue has emerged, he said. “Now the government wants to further reduce the number of train sets while increasing the number of cars per train from 16 to 24. All these hurdles are expected to delay the project,” he added.

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According to transcripts of RVNL’s post-results earnings conference call of May 17, 2024, on the BSE website, the firm’s management stated the company has made an equity injection of Rs 151.70 crore till date and the layout and colour scheme of the train sets were under approval with the government.

“And the schedule of manufacturing is that we have to start from November-December 24. And the first prototype supply is likely to be completed by September 25. And then in the first year, 12 numbers, second year, 18 numbers, third year onwards, 25 numbers...along with this manufacturing, we are supposed to maintain. So, there are three maintenance depots. One is near Jodhpur, one is in Delhi, and the third one is near Bangalore,” the management said, adding the Latur workshop is fully ready.