Wagon companies see production drop

Railways freight movement to get impacted as there has been a significant drop in wagon manufacturing by leading producers like Texmaco and Titagarh Wagons.

Supplies to the Railways have dropped sharply as there has been significant disruption in component supplies by vendors to these manufacturers. As a consequence, supplies till date to the Railways is 35% below targets between April and October.

During this time, the private sector was supposed to supply 6,300 wagons as per targets set by the Railways ministry while actual supply is 4,092.

"Execution (of wagon orders) is a big challenge due to the shortage of critical components. But we are trying our best to improve the situation," Anil Agarwal, chief financial officer of Titagarh Wagons told analysts on Monday.

Lack of orders from the Railways for a longer period forced many small and medium scale component suppliers to turn bankrupt and drove them out of business, analysts said.

The disruption is forcing the wagon makers to delay their supplies which explains the dearth of overall supplies to the Railways.

"There were no orders from the Railways for a long time before the order that came in December last year when we got 2300 wagons. Contractually, the deadline for the supply of these wagons was December this year. But since during the initial part of the year there were a lot of issues, both from the Indian Railways and the suppliers of major components, we believe the delivery period would get extended without any penalty," Agarwal told analysts.

"Performance of the wagon division remained subdued due to supply challenges faced by the company's various sub-vendors which is now gradually stabilising," AK Vijay, chief financial officer of Texmaco Rail and Engineering said.

Texmaco and Titagarh Wagons along with its group outfit Cimmco, are the two large wagon manufacturers in the country.

Even manufacturing of current orders are not remunerative in many of the cases, Agarwal said. "Out of 1,191 wagon orders that Cimmco got in December, the company would be manufacturing five types of wagons of which not all varieties are remunerative," he said.

The poor execution and non-remunerative orders have forced Titagarh group's other wagon maker Cimmco to post losses.

Data compiled by the Railways ministry shows an alarming backlog in supplies of wagons since the beginning of the year.

The fortunes of the wagon makers as well as other railways dependent small businesses might turn for the better with the likely opening of the mega tender for 22,000 wagons in December.

"The reverse auction process is now complete and we hope that the decision on the tender should be taken in a month or so. We expect that by December 15, Railways should finalise that tender," Agarwal said.

Apart from wagons, companies like Titagarh and Texmaco would benefit from likely flow of tenders for metro coaches which they also manufacture.

"We participated in the Mumbai Metro project for 378 cars and got technically qualified. In the next six months there would be around six-seven more tenders likely for Metro projects for cities like Bhopal and Indore while tender for Pune is already out," he said.