DMW was set up in 1981 with the assistance of World Bank. At that time Industries in India were not fully developed to manufacture diesel engine precision components to carry out the remanufacturing of various traction machines & engine blocks. DMW started the components manufacturing in 1986 along with the remanufacturing of traction machines & engine blocks. Need was also felt for rebuilding of locomotives to enhance performance of locomotives by incorporating latest technological upgradations and all RDSO modifications.
It was expected that with the rebuilding of locos after 18 years, the locos would become fuel efficient, shall haul heavier loads and shall be fitted with latest modern less maintenance intensive sub-assemblies and assemblies. Accordingly the rebuilding was started in DMW in 1989. The shops which were set up for component manufacturing and remanufacturing of traction machines and engine blocks are under Phase-I of the project.