Rail Budget likely to tweak wagon procurement norms

The railway ministry is likely to work out a fair pricing mechanism for wagon procurement, which is being seen as a corrective measure in the current policy. This may find some mention in the forthcoming Rail Budget.

An industry source close to the development said an overhaul of the current wagon procurement parameters is required.

“Wagon procurement is based on a mix of lowest bid as well as performance of the bidder. However, what actually happens is, even the least performing companies quote the lowest bids and manage to bag orders,” he said.

“It is this particular system that the ministry needs to address and derive a fair price mechanism for wagon procurement, because by not procuring adequate number of wagons, they also stand to lose. They need to streamline the procedure,” the source added.

Other suggestions made by the industry include ending the system of supply of items to the developer and stop advance against orders.

“When 50% advance is spent, then post production, the incentive to deliver dies. Also, Railways provides steel and certain other input materials. This is a mature industry and we can manage our resources,” said another industry source.

Railways offers a captive market for private wagon manufacturing companies such as Texmaco and Titagarh Wagons. Also, the industry is more comfortable providing wagons to Railways rather than railway container operators or logistics players.

“Railways offers a commitment that the private operators cannot. Once an order is placed, the ministry is sure to take delivery. However, in case of private operators, much depends on the market situations. There are cases where orders were cancelled,” said a source.

The industry also feels that there is no capacity constraint in the wagon manufacturing sector. Up to January this year, Texmaco has supplied 2,600 units of wagons to the Railways. It hopes to end the fiscal with sales of around 3,100 units.