Vande Bharat: What was India and Russia's dispute over majority stake and how have they resolved it?

The project involves the manufacturing of 120 state-of-the-art trains by 2029, with maintenance for 15 years. After negotiations at the highest level, the original agreement was reinstated, with Metrowagonmash holding a 70 per cent stake and RVNL getting 25 per cent while Locomotive Electronic System (LES) would retain 5 per cent stake.

RVNL and Metrowagonmash are part of the consortium that won the Indian Railway contract.

The Vande Bharat Express project, a joint venture between India and Russia, is now back on track after a prolonged dispute concerning majority stakeholder rights was finally resolved. This ambitious venture involves the manufacturing of 120 Vande Bharat trains by 2029, followed by maintenance for 15 years.

The contract sees the production of 120 Vande Bharat trains, following the consortium's successful acquisition of an Rs 30,000-crore contract. This contract also includes a commitment to maintain these trains for the next 35 years.

Companies Involved in the venture

The Rail Vikas Nigam Ltd (RVNL), a Navratna PSU under Ministry of Railways, and Metrowagonmash, a leading Russian company, are part of the consortium that won the Indian Railway contract. The original plan was to establish a Special Purpose Vehicle (SPV), Kinet Railway Solutions Ltd, which would implement the Vande Bharat project, with Metrowagonmash holding the majority stake.

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Proposed revision in share distribution

However, after securing the contract, RVNL approached Metrowagonmash, proposing a redistribution of shares. RVNL suggested increasing its stake to 69 per cent, reducing Metrowagonmash's share to 26 per cent, and leaving 5 per cent for a third partner, Locomotive Electronic System (LES).

RVNL had initially argued that they required a majority stake because the project necessitated importing multiple components from Western European and American partners. They believed that a majority shareholding on their part would foster trust among these international sellers, especially in light of Russia's strained relationships post the Ukraine-Russia conflict.

Resolution of disagreement

The Russian company stood its ground, urging adherence to the original agreement. The deadlock was resolved at the "highest level" of both governments, resulting in reinstating the original agreement. This arrangement gives Metrowagonmash a 70 per cent share, RVNL a 25 per cent stake, and LES the remaining 5 per cent.

The need to deliver the first two prototype trains for testing and trials by June 2025 may have urged RVNL to accept the original terms and finalise the agreement.

Metrowagonmash, a specialised transportation engineering company based in Mytishchi, Russia, and a part of the TMH Group, Russia's largest locomotive and rail equipment manufacturing conglomerate, is now expected to initiate the process of transferring funds for the shares.

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