Wagon makers reject Railways dual pricing formula

The ongoing negotiations between the wagon industry and the government has failed with most of the wagons makers refusing to accept the revised pricing for the Railways's wagon order.

This has forced leading industrialist and Texmaco chairman Saroj Poddar to voice his concerns, saying the government would fail to procure targeted volume of wagons this year due to unremunerative prices.

All the major wagon makers had in June refused to produce wagons against a tender for 8,509 wagons for a price of Rs 10.80 lakh apiece quoted by the L1 bidder, a price described by the industry as predatory.

"The Railway Board, after deliberation, decided to introduce a dual pricing. And instead of Rs 10.80 lakh, offered a bait, at Rs 11.50 lakh. This again was rejected by the entire industry. They made yet another attempt, and offered a price, which was the L2 (second lowest bid price) at Rs 13.05 lakh. This is still below the cost of production. Except the company which had put in the L2 (Jupiter Wagons), all other players refused to accept the price," Poddar told shareholders of Texmaco Rail & Engineering.

Texmaco has been country's largest provider of wagons to the Railways followed by Titagarh Wagons.

"The result is during the current year Railways won't get all the wagons it had tendered for. It is very apparent that at this price it is very difficult for the industry to work," he said.

Saroj Poddar, however, told dna that it is because of unhealthy competition that the industry is bereft of business.

"We had meeting with the ministry but what can they do as we can't blame the Railways, and should instead blame ourselves. It is unhealthy competition which that driven this. We ourselves are responsible for this situation. Railways have to accept the lowest tendered so why blame them? The blame lies with us," Poddar said.

Competition among wagon makers, jumping at every erratic order from Railways, has pushed down price of wagons from more than Rs 16 lakh two years back to a little over Rs 11 lakh, resulting in some of the companies booking huge losses, he said.

"We don't want extraordinary profits but only that which is reasonable. We can't do business booking losses. Railways needs wagons but unless there is realistic pricing, supply wouldn't be possible. So, I am optimistic that this will happen and will happen soon," Poddar told dna.