Patna: The Bihar government has reasons to feel relieved following Union finance minister Arun Jaitley's recent statement on the proposed diesel locomotive plant in Chhapra.

Jaitley, during an interview he gave in the US, singled out the GE project and stressed that railway minister Piyush Goyal had already clarified that there was no question of cancelling the contract. "At the same time, GE should also not expect that India will not experiment with electrification, which is ecologically a much better way to run the railways. and therefore, modernisation will involve electrification. But there is a contract in place and the last thing India wants in this environment is we get an image in a country which breaches contracts," he said in the interview.

"It further clears the doubts about the project," remarked an official, stressing that Jaitley had given a commitment to GE that the contract would be honoured. The state government had jitters following indication that it may be scrapped.

Former railway minister Suresh Prabhu had signed the deal for setting up a diesel locomotive factory at Marhaura in Chhapra with the US-based company in 2015.

The Rs 2,000-plus crore project entailed GE manufacturing 1,000 diesel locomotives for the Indian Railways in the next 10 years. However, when Goyal took over, he suggested diesel locomotives involved high maintenance cost and did not suit the requirement of the Indian Railways. Chief minister Nitish Kumar, a former Union railway minister, wrote a letter to Goyal pleading that the contract should not be cancelled, as it would damage the investment climate of the state.

Around 300 acres were acquired from farmers in Chhapra during Lalu Prasad's tenure as railway minister for a diesel locomotive factory. Lalu represented Chhapra in the Lok Sabha. However, he could not push through the project and successive ministers put it in the public-private partnership mode for which there were no takers.

In 2015, the contract for production of diesel locomotives in Marhaura was given to GE and another contract was given to Alstom of France to manufacture electrical locomotives in Madhepura - the total investment of both was around Rs 40,000 crore. The scheduled time for starting production in Marhaura is March 2018. GE sources indicate that 75 per cent of construction work of the factory had already been completed. Alstom recently claimed that it had already started production.