Indian Railways tweaks wagon tendering norms

12 Nov

The railways, which requires to add 17,000 more wagons to its fleet next fiscal given the estimated growth in freight loading, has tweaked its tendering norms to avoid irrationally aggressive bidding by wagon producers that have in the past left many of them high and dry.

According to the revised policy, six among the bidders will get an opportunity to supply wagons at the L1 price; earlier, only two other players were allowed to match the L1 bidder’s price and in practice, many of them backed out as the L1 price was too low to be remunerative. Since wagon producers have installed large capacities looking at the future demand for wagons from the railways, intense competition prevailed among them, resulting in unduly aggressive bidding.


The national transporter feels that by allowing more players to match the L1 price, the competition intensity will come down.

According to sources, 60% of the total wagon requirement would now be met through the competitive bidding route as against 45% now. This means that the pool of demand to be met by the eight “regular” manufacturers will proportionately come down. The idea is to let the other players which have created capacities feel confident of getting contracts. The regular suppliers have hitherto got more opportunities than others based on their past performance, effectively constricting the chances for others.

“We have kept in mind the woes of the wagon manufacturers. We have ensured that everyone gets a piece of the action and we expect the logjam created earlier this year wont be repeated again,” a railway official said.

Earlier this year, the national transporter had floated tenders for procurement of 8,509 wagons, of which only 3,146 could be purchased through competitive bidding, as all companies except the winning (L1) bidder refused to supply wagons at the L1 price. Jindal Rail, the L1 bidder, quoted a price of R10.80 lakh per wagon, compared with the previous year’s L1 price of R11.74 lakh, was awarded the contract for supplying 1,871 wagons. As other players refused to match the price, the ministry even resorted to dual pricing and offered to pay R12 lakh per wagon, but again, none of the players were forthcoming. Subsequently, when the price was raised to R13.05 lakh at par with the L2 bid by Jupiter Wagons, none apart from Jupiter could supply at even that price.

In order to ensure that there is no break in production, the transporter has also scrapped its policy of releasing the wagon contract in two tranches and will release the full wagon contract at once. The railways released the first tranche of 50% of final allocated quantity for each successful bidder at the beginning of the contract and the balance 50% was released at the end of six months from the date of the order, provided the manufacturer has supplied at least 50% of the total outstanding railway board orders as on the last date of the month prior to the date of placement of orders. The performance of current orders, placed against the tender during the period of the first six months after the contract is placed, was also taken into account before releasing the second tranche.

With the new policy in place, the L1 bidder will get to supply 22% of the total tendered amount while L2, L3, L4, L5 and L6 will be given a share of 20%, 18%, 16%, 13% and 11%, respectively.

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Posted by on November 12, 2015 in Uncategorized


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