The Cabinet on Wednesday approved re-bidding of two rail projects in Bihar that were stuck in bureaucratic hurdles for almost three years.

The government has plans to set up a diesel locomotive factory and an electric locomotive factory in Marhowra and Madhepura, respectively.

The projects were announced by former Railway Minister Lalu Prasad Yadav in the year 2007. The two projects combined will cost an estimated Rs 3346.15 crore.

On April 22, Railway Minister Pawan Kumar Bansal had held a meeting with Finance Minister P Chidambaram and Deputy Chairman Planning Commission Montek Singh Ahluwalia to remove the hurdles in the passing of the projects.

A senior Railways Ministry official said, "The bidders will be aware of the government's stand on all the issues before participating in the process so that there is no unpleasant surprise."

Previously, a five-member committee at the Railway Board had estimated that with the existing terms of the PPP model finalized for the two projects in Bihar, the government would suffer a loss of Rs 16,000.

The two factories will produce an estimated 800 electric locomotives of 12,000hp and a mix of 1,000 diesel locomotives for railways over the next ten years.