IN an attempt to avoid economic sanctions imposed by Western countries on Russia following its invasion of Ukraine, Indian Railways (IR) has restructured the joint venture of Russian and Indian companies that was awarded a Rs 145bn ($US 1.76bn) contract in 2023 to supply 120 sleeper variants of the Vande Bharat EMU.
The share of the Kinet Railway Solutions joint venture held by rolling stock manufacturer Metrowagonmash has been cut from 70% to 35%, while the stake held by fellow Russian supplier Locomotive Electronics System (LES) has been increased from 5% to 40%. Although Metrowagonmash is facing sanctions, LES is not.
The Indian stake in Kinet remains unchanged at 25%, held by Rail Vikas Nigam (RVNL). This is a government enterprise whose majority shareholder is the Ministry of Railways, and which operates passenger rolling stock production facilities in Sonipat and Latur.
Under the revised joint venture agreement, Metrowagonmash and LES will receive two-thirds of the contract amount or Rs 800m per train, and RVNL will receive one-third or Rs 400m.
IR has reportedly restructured Kinet in response to concerns that European component suppliers would withdraw from the project if sanctions continued to be imposed on former majority partner Metrowagonmash. Earlier this year, IR subsidiary Integral Coach Factory (ICF) awarded Alstom a €144m contract to provide traction equipment and other electrical components.
Sanctions were first imposed on Metrowagonmash in 2023, the same year that IR awarded the Vande Bharat sleeper contract. According to an IR official, the decision to change the ownership of Kinet was taken in 2023 but has only become a matter of record now.
Kinet was originally awarded a contract to supply 120 16-car EMUs at a cost of Rs 1.26bn per train. IR later asked the joint venture to supply 24-car trains instead, causing disagreement and several months of delay, but the project is now apparently back on course after IR relented and reverted to the original 16-car design.
According to IR sources, restructuring Kinet will ensure the availability of critical components, while an RVNL official said the changes will also optimise project costs, as IR will have more options for sourcing components. However, the major threat remains that sanctions will also be imposed on Russian supplier LES.
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