Railway equipments merit more rational rate of GST: Siemens' Tilak Raj Seth

'Siemens, Alstom rail business merger by December 2018'

Two arch-rivals, Siemens and Alstom, have recently announced the merger of their rail businesses to create a European transportation giant to counter Chinese competition. TILAK RAJ SETH, executive vice-president of Siemens and chief executive officer of its mobility division in India, talks to Shine Jacob about the merger, the impact of GST on the sector, and about the company’s road-ahead in India. Edited excerpts:

1) What is the status of the rail business merger between Siemens and Alstom?

There is an announcement of the organisations getting together but that so-called closure is yet to happen. Further, such a closure takes time. We expect it to happen by the end of the next calendar year. It could take anything between 12 to 18 months. Naturally, there are certain steps to be completed. Until that time, both organisations continue to do their business as usual with rather fiercer competition. In other words, we remain fierce competitors.

2) Both Siemens and Alstom are in the fray for the Kanchrapara coach factory in Bengal. Will the merger announcement affect that?

Kanchrapara is an iconic project. It's a Make in India initiative in a public-private partnership setting, where the Indian Railways and the successful bidder will co-own this facility and produce modern technology coaches. This project will bring to India the EMU (Electric Multiple Unit) and MEMU (Main-line Electric Multiple Unit), in a setting that will have many advantages. It will bring technology that we don't have. It will bring in a method of manufacturing and project execution that is of an international and global standard.

Five thousand cars are to be built over 12 years at Kanchrapara. Half of the fleet is supposed to be maintained over the next 13 years. It's a multi-billion-dollar project. If you're searching for a number, $5 billion is good. We qualified with Bombardier — that is a group called Siemens-Bombardier. There are two other groups – CRRC-Alstom and Medha-Stadler – that have qualified. Right now, we are in the RFP (request for proposal) phase and the submission bid is currently due in the middle of January. We are working towards this and we are hopeful that we'll deal with this with as much responsibility, excellence, and transparency — the way we did the two local projects that were equally iconic.

Regarding the merger, as of today, we are two competing companies and will continue to be competitors. We are committed to the Kanchrapara project and to offer the best competitive bid.

3) How do you see the change in policies since Piyush Goyal has taken charge of the ministry?

There's a lot of visible positivity. The new team – minister Goyal, Indian Railway Board Chairman Ashwani Lohani, the connected Railway Board management, and, not to forget, even the general managers in various zonal railways production units – is in a rhythm, which has been set by a sense of urgency.

This sense of urgency is covering key topics. One is the safety of the Railways. The second is excellence in operations and taking them to the level of global standards. The third is enhancing throughput — we're talking about enhancing and augmenting the speeds, removing bottlenecks in the system, and enhancing the throughput. The fourth is the pace of electrification. In a very short time, they will electrify all our tracks.

The minister has said that there is no Budget constraint on safety. Also, he has said that the respective channel managers are free to take any action that is required to enhance safety. He also mentioned that whatever governance is required from the Railway board will be done in a very defined and specified time. Now, the idea is that things can go on undisturbed, as required.

4) Even the pace of electrification has increased. What is your take on this?

We were earlier talking about 4,000 km electrification per annum. Now, they're talking about 12,000 km electrification per annum. It's a different pace altogether. This is a very welcome step because, with this, you come to use a more environmental-friendly mode of transport — electric, no coals, EMUs, inter-city trains, all of these.

5) From an industry point of view, what should be the strategy to increase the involvement of the private sector in railway projects?

We know that it is on the high-agenda list. Firstly, the investment must continue to happen unhindered. Second is that with regard to project execution, the time should be well defined. Third, the terms and conditions must be equitable. The industry and the Indian Railways have sat down and shared each other's concerns. There is already a joint working group that is looking into this.

6) After GST was implemented, there seems to be a lot of impact on the infrastructure sector. Has it affected you?

The highest slab of GST, at 28 per cent, applies on a lot of rail components — on traction converters, on signalling equipment and so on. Earlier, it was a lower slab. Since railways is the most efficient and environmental-friendly mode of transport, it certainly merits a more rational rate of GST. Further, there is an inverted GST in some transport areas, in the sense that you have five per cent GST on trains but 28 per cent GST on many components. Under these circumstances, you don't offset the paid GST on components with the final product, which needs to be corrected.

7) Apart from Kanchrapara, what are the other projects you are more bullish on?

While we are not bullish, the Railways has a lot of iconic projects going on. Apart from this, there is a project of locomotive purchase going on right now in the qualification phase. Right now, we're quoting for the locomotive projects and for EMU components. We're also quoting for locomotive components. Further, We're quoting for another line of business called TPWS (Train Protection and Warning System). We're also participating in many of them.