Twitter
Advertisement

Wagon makers stare at losses as business turning unviable

Latest News
article-main
FacebookTwitterWhatsappLinkedin

Induction of Suresh Prabhu as the Railway Minister may have enthused stock market investors in the scrips of wagon making companies, but the overall situation of the industry remains grim as prices quoted by the companies and the basis of which wagon tenders being awarded are below the cost of production, Titagarh Wagons chairman JP Chowdhury has disclosed.

The last industry-wide wagon allocation by the Railways happened in April after a long gap of two years, when many of the wagon makers like Texmaco operated at low capacity utilisation while some companies like Jessop & Co were forced to wound up.

The desperation of the wagon makers starved of business from both the government as well as private sector forced them to quote unrealistically and unsustainably low prices that pushed below their cost of production, feels Chowdhury.

"It was not the fault of the Railway department but unprofessional attitude of some of the private players that led to this scenario which has made us produce at prices below what is economically viable," Chowdhury, a leading voice of the industry, told dna.

The impact is beginning to be felt at the bottomline of the company.

"The company has recently entered into a contract with the Railways for supply of 498 wagons. Due to low volume of procurement by Indian Railways and resultant intense unhealthy competition, the pricing of the wagon as finalised by the Indian Railways is un-remunerative and is likely to result in loss on execution of this contract," Cimmco Ltd, a wagon maker, also owned by the Chowdhury family, has said in its second quarterly earnings.
Cimmco has booked a loss of Rs 549.28 core on such "onerous contract".

Chowdhury does not see any revision in the pricing with the appointment of a new minister.

"I don't think there is any such opportunity for us, and we have to continue producing the wagons at these prices. Maybe, in the next tender such unreasonable pricing would be corrected," Chowdhury said.

The biggest beneficiary among those who got the allocation is the Saroj Poddar-owned listed entity Texmaco Rail and Engineering Ltd, which received orders for 2,400 wagons while Titagarh Wagons bagged orders for 1,538 wagons.

Apart from Cimmco, Titagarh, Texmaco, others who bagged contracts were Burn Standard, Bharat Wagon, Braithwaite, Jupiter Wagons, Besco, Hindustan Engineering, Modern Industries, Amtek Railcar, and Jindal Rail.
The quoted price for supplying the common WD-02-BOXNHL-2011 type of wagons was Rs 17,21,066 in 2012.

The same type of wagon is now being supplied at Rs 11,74,500 a unit in 2014.

The price is lower by 32% even though two years have passed!

Suresh Prabhu reportedly asked Railway Board officials not to bring in any files including tenders for his signature and asked them to closely look into them instead.

The officials would do better if they look particularly into the wagon tender documents, feel some industry insiders.

Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement