Indian Railways has awarded two contracts worth $5.6bn to US-based General Electric (GE) and French engineering firm Alstom for new diesel and electric locomotives.

Both the firms were issued the letters of award (LOA) for establishing diesel and electric locomotive factories in Marhowra and Madhepura in the Indian state of Bihar.

The contracts mark the Indian Government’s first major foreign direct investment (FDI) in rail projects, as well as advance the ‘Make in India’ initiative.

"This project combines GE’s deep infrastructure and manufacturing expertise with India’s growth priorities."

Alstom has secured a Rs200bn ($3bn) contract to supply Indian Railways with 800 electric locomotives in the next 11 years and set up a electric locomotive manufacturing plant in Madhepura.

The French firm will manufacture 12,000HP electric locomotives for heavy haulage applications.

As part of the project, five diesel locos will be imported and the remaining 795 will be manufactured at Madhepura.

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Under the $2.6bn deal, GE will provide the railways with 1,000 diesel locomotives over the next 11 years, as well as invest $200m in a plant and maintenance sheds.

The deal will see GE build a diesel locomotive factory (DLF) in Marhowra, Bihar, as well as maintenance sheds at Bhatinda, Punjab, and Gandhidham, Gujarat.

GE chairman and CEO Jeff Immelt said: "This infrastructure project is further evidence of India’s position as a growth engine for Asia.

"It is a major advancement and milestone for India and for GE, and a symbol of our commitment and support of the ‘Make in India’ initiative."

In order to build and operate the new DLF facility a new joint venture (JV) company will be established between the Indian Ministry of Railways and GE Global Sourcing India.

Indian Railways has completed acquisition and taken possession of 226 acres of land for the new DLF facility, which is expected to be established within the next three years.

Of the 1,000 diesel locomotives to be built by GE, 700 will be of 4,500HP and 300 of 6,000HP.

GE Transportation chief executive officer Jamie Miller said: "This project combines GE’s deep infrastructure and manufacturing expertise with India’s growth priorities."