Railways uses dual pricing to defuse standoff after majority wagon makers refused supply the price quote by the lowest bidder. Talgo’s lighter trains consume 30 per cent less energy which will help railways reduce their power bill.
New Delhi: A prolonged tussle between the wagon makers and Railways over a huge procurement tender for 14,777 wagons, the largest in recent years, has been settled with the industry accepting a revised offer.
The offer is much higher than the price discovered through the tendering process and which was rejected by most of the industry players for being unremunerative.
“The negotiations have been successfully concluded following which Railways have offered Rs 14.50 lakh per BOXNHL type wagon, a price which has been accepted by most of the industry players. The orders would now start flowing,” an official of Texmaco Rail & Engineering, the largest wagon maker in the country, told.
The crisis was triggered when Amtek Railcar, part of the troubled Amtek group, quoted a price of Rs 12.91 lakh, which was termed as unprofitable and below the cost of production by bigger wagon makers like Texmaco and Titagarh Wagons.
“As Amtek group is understood to be under dire financial stress, their officials might have a quoted price which wasn’t profitable. The rest of the industry couldn’t accept that,” an industry official said on condition of anonymity.
While an order for 500 wagons has just been issued to Amtek Railcar at Rs 12.90 lakh, the rest of the industry would be offered the higher price of Rs 14.50 lakh per wagon, which was decided after several rounds of negotiations.
Unlike conventional tendering process, Indian Railways doesn’t award all wagon orders to the lowest bidder.
Out of the order quantity, 60% would get allocated among L1 to L6 (lowest to the sixth lower bidder) in the ratio of progressively reducing volume starting with 22% of total tender value to 11%.
The balance 40% would get distributed among others on the basis of their respective average annual production for the past five years.
This ensures equitable distribution of work among all eligible regular wagon makers.
And now orders are being issued as per a dual pricing formula, a strategy resorted to by the Railway Board to resolve the crisis.
Following prolonged drought in the wagon order flow despite the government’s stated policy of infusing significant investment in the railway sector, wagon industry turned desperate for any new orders by quoting prices which were even below the cost of materials.
Clamour for erratic orders from Railways has pushed down the price of wagons from more than Rs 16 lakh two years back to Rs 13 lakh, as per the last order issued to Amtek.
Earlier, a similar crisis had happened when one of the new entrants into the wagon sector quoted a ridiculously low price of Rs 10.80 lakh.
After being rejected by the majority of the industry, Railways offered them the L2 (second lowest bid price) of Rs 13.05 lakh quoted by Jupiter Wagons.
While Jupiter was subsequently allotted their share of 1,075 wagons last August, others refused that price.