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Railway blinks, reworks wagon pricing

The order for 8,509 wagons was refused by almost all manufacturers; Winning bid, termed 'predatory', was lower than last year's price of Rs 11.74 lakh apiece

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The Railways, it appears, has blinked first in the stand-off with the wagon industry over below-cost pricing of wagons.

The matter has now been resolved to a large extent with the Railways, wherein the original price for the wagons has been restored and the execution of the remaining order has commenced, industry officials said.
This follows a meeting between representatives of the industry and the railway ministry held earlier at New Delhi.

It was earlier reported by dna that the ministry had decided to look into the charges of predatory pricing and examine reworking the clauses of tenders to reduce chances of any bidder quoting unrealistic prices.

In June, the Railways had come out with an industry wide order for 8,509 wagons. But, almost all the major wagon makers refused to produce those wagons for a price of Rs 10.80 lakh apiece quoted by L1 bidder, which bagged orders for 1654 units of BOXNHL variety.

The industry described the bid as predatory, and lower than previous year's price of Rs 11.74 lakh apiece, dna had reported.

The imbroglio impacted the industry's financial health.

"The current orders of BOXNHL wagons against last tender have been restored at the contract price. The Railway board is no longer imposing L1 (lowest) price of the predatory bidder in the new tender for 2015-16 in respect of balance quantity of last tender," Ramesh Maheshwari, executive vice-chairman, Texmaco Rail and Engineering said.

"During the quarter, the dispatch of wagons to Indian Railways was significantly reduced on account of uncertainty imposed by the Railways by downward revision of price of the existing wagon orders based on predatory prices quoted by a party against the new tender for 2015-16. The price quoted was below the direct cost of manufacturing the wagons, leading to unremunerative prices, and thus the company didn't accept the order proposed to be placed for the year," Titagarh had said while announcing its earnings for the first quarter.

Titagarh's entire Rs 171 crore of revenues for the first quarter comprised entirely of sales to private sector and exports with nil income from wagon or coach sales to the railways, once its key customer.

"It was very difficult to convince our workers to sit idle and not to execute the order. But the decision was made for the long term survival of the industry as our labour or power costs were not being covered by the price," Maheshwari said.

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