Siemens has signed a Rs 26,000-crore contract to supply and service freight trains in India, the German engineering company said on Monday, the biggest locomotive deal in its history.

Siemens will deliver 1,200 electric locomotives and provide servicing for 35 years under the agreement, also its biggest ever in India.

The Siemens-designed, 9,000-horsepower trains with a top speed of 120 km (75 miles)/ hr will be assembled in India over the next 11 years, with deliveries starting in 24 months.

The assembly will be done at the Indian Railways factory at Dahod, Gujarat.

“These new locomotives ... can replace between 500,000 to 800,000 trucks over their lifecycle,” said Siemens Mobility CEO Michael Peter.

The order was a big step for Siemens in India, Peter told Reuters, saying the company had previously mainly provided components and infrastructure there.

“India is looking for technology, better efficiency, and longer lifespan for its trains,” he said in an interview. “In the past India built their own trains, but they want to increase reliability and average speeds.”

The deal is the latest bumper contract won by Siemens after it signed a 900 million euro deal for a new metro line in Sydney, Australia in December.

Peter was confident about reaching Siemens’s goal of increasing revenue at the mobility business by 6-9 per cent this year, although this contract would mainly appear as orders in 2023. He said profit margins were in line with what he expected for rolling stock, declining to comment further.

He said Siemens was also looking at other contracts in India, the world’s largest rail market with 24 million passengers travelling daily on more than 22,000 trains.

The government in New Delhi wants to increase the rail network’ share of freight transport to 40-45 per cent from the current 27 per cent, said Siemens, whose first contact in India — a London to Calcutta telegraph line - dates back to 1867.

Siemens, India was selected as the technology partner through a fair, transparent and competitive bidding process to manufacture and maintain these locomotives, the railways said.

The deal leaves out Indian entities Chittaranjan Locomotive Works and Banaras Locomotive Works. Sources said the domestic manufacturers do not have the capability to make 9000 HP and 12000 HP electric freight locomotives.

A supportive framework is required to build these locomotives within the country to truly fulfil the Make in India mandate.

With inputs from Calcutta Bureau