Metros in Tier-II cities open business opportunities

Estimated spending on Metro systems in 3-5 years is Rs 2.3 lakh crore

Mass rapid transportation is entering smaller cities and bringing along massive business opportunities for railway companies.
 

Kochi, Jaipur and Lucknow already have Metro trains. Blueprints for Metros in Indore and Bhopal are ready and more can be expected soon. These are part of the nearly 50 Tier-II cities and towns that would soon have modern Metro systems, as part of the government’s urban development drive. The Centre is encouraging cities with more than two million to develop mass transit systems.

The estimated spending for Metro systems over three to five years is Rs 2.3 lakh crore. Businesses are planning to ride on this massive business wave. Companies such as Alstom, Bombardier and Hyundai Rotem are eyeing a piece of this pie.

Rail coaches, rolling stocks, signalling and other electrical components contribute close to 50-60 per cent of the cost of a Metro project. “This offers a significant opportunity for the suppliers of these equipment,” Jagannarayan Padmanabhan, practice leader and director-transport and logistics, CRISIL Infrastructure Advisory, said.

The Indore Metro project, for example, is expected to cost Rs 7,522.63 crore, including financial cooperation from the Asian Development Bank and the New Development Bank. The Bhopal project is estimated at Rs 6,962.92 crore and is being funded by the European Investment Bank. 

The Kochi Metro, inaugurated in June, is estimated to cost Rs 5,181.79 crore.

The 25.6-km line covers 22 stations. Alstom is undertaking signalling, telecom and electrification solution for the Metro. The company’s scope includes design, manufacture, supply, installation, testing and commissioning of radio communication-based train control signalling solution and supply of onboard equipment for 25 trains. It would provide an integrated telecom solution comprising  radio, master clock, CCTV, passenger information display system, passenger announcement system and gigabit network.
 

Contracts for rolling stock and signalling and electric systems have also made such companies put up manufacturing units.

Alstom, which employs close to 3,000, is executing Metro projects in Chennai, Kochi and Lucknow. The rolling stock for these has been manufactured at Sri City, near Chennai. The company is also executing signalling and power supply systems for a 343-km section on the World Bank-funded Eastern Dedicated Freight Corridor.

“We are already playing an important role in several upcoming urban rail projects,” Bharat Salhotra, managing director of Alstom Transport, said. “Starting from designing and manufacturing completely out of India, to establishing local supply chains, we are well positioned to provide end-to-end full systems turnkey solution from India and to emerge as the preferred partner for our customer.”

Canadian major Bombardier, for instance, has a supplier base and over 2,200 highly skilled employees in India. It operates a railway vehicle manufacturing site and bogie assembly hall at Savli near Vadodara, Gujarat. In addition, it has a propulsion system manufacturing facility at Maneja, near Vadodara.

Bombardier is pursuing various Metro projects in Delhi, Bengaluru, Mumbai and Visakhapatnam. It is also working on light rail for Kerala cities.

In a recent report, ICRA said the sector has seen strong traction in the last couple of years and is expected to provide sizeable opportunities for construction companies over three to five years due to a strong pipeline of projects awaiting approval.

 

K Ravichandran, senior vice-president and group-head, corporate ratings, ICRA, said in the report: “Roads and urban infrastructure, including Metros, are two key segments which have witnessed robust order inflows for the construction companies. Further, with a sizeable pipeline of projects in these segments, the construction sector is expected to have sufficient order inflows, and companies with strong track record and healthy balance sheet are expected to exhibit strong growth.”

Currently, 350 km of route network is under operation in India. Critical mass has already been achieved on the passenger front. The number is expected to only increase significantly in the coming years.