Railways plans separate pricing mechanism for Steel Rails, may invite Foreign Firms

Indian Railways had in 2018-19 procured 100,000 tonnes of rails from Jindal Steel & Power (JSPL), the first from the private sector in at least three decades. Now Govt may invite foreign firms to set up rail-making units in India

NEW DELHI: The government might have a separate pricing mechanism for procurement of rails from private steel companies by Indian Railways (IR). According to multiple sources, the ministry of steel will be taking a decision on this.

IR had in 2018-19 procured 100,000 tonnes of rails from Jindal Steel & Power (JSPL), the first from the private sector in at least three decades. Early this year, JSPL won another order, for Rs 665 crore from Rail Vikas Nigam Ltd (RVNL, a company under the railways ministry) to supply 89,042 tonnes of rails.

The central government is considering a global tender for manufacturing of rails. Companies would be asked to set up production units as part of the ‘Make in India’ project.

“With (government-owned) Steel Authority of India (SAIL) and Jindal Steel & Power (JSPL) unlikely to meet demand from the railways, there are plans for a global tender,” said a source in the know.

The government is likely to ask for an Expression of Interest (EoI) from global companies. The major entities who could take part include Voestalpine Schienen, Sumitomo Corporation, Angang Group International, East Metals, CRM Hong Kong, British Steel, France Rail and Atlantic Steel, says the source.

In November 2018, Rail Vikas Nigam Ltd (RVNL), a project development subsidiary of the railways, was given exemption from the mandatory local sourcing clause while procuring steel rails. This exemption was required under the provisions of the Domestically Manufactured Iron and Steel Policy for government procurement.

According to estimates, the requirement of rails for this financial year would be around 1.7 million tonnes (mt). Of this, SAIL has committed around 1.35 mt. The railways has so far placed orders for 130,000 tonnes worth around Rs 650 crore to JSPL. Sources said there is likely to be a shortage of at least 300,000 tonnes, which the government wants to meet through the proposed global tender.

“Regular supply from JSPL is likely to start from March. The product is now going through various quality checks,” said an RVNL official. He said the company was unaware about any planned EoI.

In 2018-19, SAIL had supplied 985,000 tonnes of rails worth Rs 5,900 crore. It has said it is confident of increasing this by 37 per cent in 2019-20.

“At present, Indian manufacturers — SAIL and JSPL — can go up to 1.5-2 mt in terms of capacity. A lot will depend on how much they can produce, based on the railways requirement,” the RVNL official added.

The railways and SAIL have been in a dispute regarding quality of steel. This was after a report from a Transportation Technology Transfer team from the University of Illinois that the tensile strength of existing tracks was “not adequate” for 25-tonne axle load operations. The railways wanted an increase in the tensile strength from the current 880 mega pascals (MPa) to 1,080 MPa. A three-member panel was then set up on the issue.