Indian Railways to invest Rs 1 trillion to procure 90,000 freight wagons in next three years

Anushka Khare Posted on: 2022-03-15 08:15:00 Viewer: 4,371 Comments: 0 Country: India City: New Delhi

Indian Railways to invest Rs 1 trillion to procure 90,000 freight wagons in next three years

New Delhi, India (Urban Transport News): Indian Railways is planning to unveil a mega investment plan worth Rs 1 lakh crore to procure a total of 90,000 wagons in the next three years. The first tender is likely to float in June to procure 30,000 freight wagons with an estimated cost of over Rs 35,000 crore.

Sources said that details of the tender are being finalized by the Indian Railways. The tender will set a record for the railways, which has never procured more than 15,000 wagons in one year, offering a huge boost to domestic manufacturing of rail wagons.

Presently, Texmaco Rail & Engineering Ltd, Titagarh Wagons Ltd, Jindal Rail Infrastructure Ltd, and Jupiter Wagons are among the major wagon producers in the country. The government’s plan is to revive manufacturing in a sector that has been grappling with low capacity utilization because of muted demand from the railways. The large order size is in sync with expectations of a future demand push from dedicated freight corridors and the need to make rakes available throughout the year for bulk freight consumers.

“The stakeholder’s consultation for the wagon tender has been completed and it may be issued very soon, as early as late next month. The move will give a huge fillip to the domestic wagon manufacturing industry and allow the railways to meet the growing demand," said sources.

“The industry had never supplied more than 15,000 wagons. It’s a challenge for the industry as well. While the installed capacity of the industry is about 30,000 wagons, it has never been tested. The industry is operating at much lower capacities and 2,500 wagons per month may not happen initially though numbers will gradually ramp up," commented Ashish Kumar Gupta, Managing Director, Texmaco Rail & Engineering Ltd. 

Sources said the Railways would use the preferred reverse e-auction model for the freight wagon tender to allow the second-lowest bidder to get a portion of the tender if the lowest bidder isn’t able to serve the entire order. Besides meeting the future growth in demand, the order is also likely to reduce the cost of wagons by up to 20% as competition will drive down prices.

The carrying capacity of the national transporter is set to almost double to more than 2,400 million tonnes per year, with the construction of dedicated freight corridors. This will require the railways to augment wagon capacity to utilize the available infrastructure. Also, the railways have set an internal target of enhancing its freight loading from slightly less than 4 million tonnes per day currently to more than 5 million tonnes. This would need an additional 100,000 wagons, which the proposed tender aims to achieve over three years.

According to government officials, depending on the progress of tenders in the initial year, the size of wagon procurement may be enhanced in subsequent years. The ministry hopes that the size of the global tender would also encourage foreign investors to consider building wagon manufacturing facilities in India, which will be a boost to the government’s Make in India initiative.

The Indian Railways has set a freight earnings target of Rs 1.65 trillion in FY23, up from Rs 1.37 trillion in FY22. The budgetary provisions for wagon procurement for FY23 at Rs 7,978 crore, however, look muted in comparison with the latest push towards local manufacturing, but government officials said the budget may not be a constraint and, depending on the evolving situation, the figure could be enhanced during the year.

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