Railways plans to take Reverse Auction route for high-value purchases

NEW DELHI: Indian Railways is proposing to adopt the reverse auction process for high-value procurement, including those for diesel and lubricants, spare parts for locomotives, coaches, manufacturing, signalling and telecom cables, among others.

“Detailed policy guidelines for extending reverse auction to many more items are being formulated, and will be implemented soon,” said a government official. Reverse auction will be adopted for items to cover up to 70 per cent of its procurement cost to improve competitive bidding and transparency further.

For many years, the Railways has been adopting the online auction mechanism for selling its scrap. The Railways procures almost ₹50,000 crore worth of goods every year, of which half are high value purchases.

In the reverse auction, all bidders who supply a particular product can see the lowest price, and accordingly further lower the price for a given quantity. This provides the suppliers an option to decide on lowering their margin.

The Railways does 100 per cent procurement through online-bidding. It has largely been the system, where the price bids are opened after technical qualification round. This procurement system is backed by the principle that all bidders must submit their best bids as and when they submit them.

Incidentally, selling scrap is an area where the Railways has been following an online auction system, where different bidders have the option to up the price they are offering to Railways, as they are aware of the price offered by others. The Railways accordingly decides the party offering the highest price. The move has helped the Railways get best prices for scrap purchase. It receives ₹3,000 crore by selling scrap from its tracks, offices and workshops.

It has tried various mechanisms of procurement, including the Swiss Challenge method for station modernisation, a process where unsolicited bid from a single bidder is accepted, and subsequently, the unsolicited bid is made public, allowing others to do the same work at a lower price. The Railways, which has already adopted e-bidding for its procurement, has started doing its internal management digitally, with bill payment, submissions, receipts, inspection certificates being submitted and processed online. The only exception is local petty purchases, including stationery like pen and pencils.