Vande Bharat on the table as PM Modi visits Russia | Latest news India

Regulatory and technical hurdles impacting a $6.5 billion joint venture project to build Vande Bharat trains by Russia's Transmashholding (TMH) are likely to be raised by Moscow during Prime Minister Narendra Modis' visit to Kazan this week, people familiar with the matter said.

Russian engineering company TMH is executing the project in a joint venture with state-owned Rail Vikas Nigam Ltd (RVNL). The Russian side raised questions delaying the project during Modi's visit to Moscow in July, and they are likely to arise again when the Indian leader visits Kazan on October 22 to attend the BRICS summit, four said people aware of developments in the situation.

Modi is expected to meet Russian President Vladimir Putin on the sidelines of the Brics summit on Tuesday. The two leaders last met at an annual bilateral summit in Moscow on July 8-9. Putin said the upcoming September meeting would be an opportunity for both sides to take stock of ongoing initiatives.

A consortium comprising RVNL and TMH has faced several problems since winning the tender for the 58,000 crore tender in March 2023 to manufacture and maintain 200 Vande Bharat trains at the then estimated cost of 120 crores per ream. Subsequently, the government reduced the contract from 200 sets to 120, thereby reducing the total size of the project to 36,000 crore, the people said on condition of anonymity.

Later, the government suspended the consortium's request to change the shareholding structure in special purpose vehicle (SPV) Kinet Railway Solutions Ltd. The share exchange was proposed only between related Russian entities without affecting RVNL's equity stake in any way, they said.

Spokespeople for RVNL, Kinet Railways Solutions, the Prime Minister's Office and the ministries of Foreign Affairs, Railways and Finance did not respond to an emailed question on the matter.

A delegation led by senior TMH officials visited New Delhi in September for meetings aimed at removing obstacles holding back the project. The Russian team then visited Maharashtra, where the project is to be located, on September 18-19, one of the sources said.

A second person said: “The SPV has three shareholder partners, RVNL and two related Russian entities. The request concerns a change in the shareholding structure between the two existing Russian companies, apparently to avoid Western sanctions. Regulatory approval has been pending for a long time, without citing any specific reason.

TMH is among Russian entities that faced U.S. sanctions following Russia's February 2022 invasion of Ukraine.

According to a press release 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 Indian RVNL have formed SPV Kinet Railway Solutions Ltd and signed a shareholding agreement to manufacture Vande Bharat trainsets and provide maintenance services for 35 years.

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

Later, the Russian entities contacted the government to reduce MWM's stake from 70% to 5% and LES from 5% to 70%, without affecting RVNL's equity stake, the second person said.

While awaiting government approval to change the shareholding of Russian entities, a new problem has emerged, he said. The government now wants to further reduce the number of trainsets while increasing the number of cars per train from 16 to 24. All these obstacles are expected to delay the project, he added.

According to the transcripts of RVNL's post-results conference call on May 17, 2024, on the BSE website, the company's management said that the company had made an equity infusion of 151.70 crore as on date and the layout and color scheme of the trains were under approval by the government.

And the manufacturing schedule is we have to start between November and December 24th. And delivery of the first prototype will probably be completed by September 25. And then the first year, 12 issues, the second year, 18 issues, from the third year, 25 issues… along with this manufacturing, we are supposed to maintain. So there are three maintenance depots. One is near Jodhpur, the other is in Delhi and the third is near Bangalore, the management said, adding that the Latur workshop is fully ready.