Seven foreign steel companies and India's Jindal Steel & Power Ltd (JSPL) have bid for a Rs2,000-crore contract from the railway ministry for an expanded track renewal plan. This is the first time in three decades that rail procurement has been opened to the private sector.
The foreign entities are Japan's Sumitomo Corporation, East Metals AG (a unit of Russian steel and coal producer Evraz), Austrian company voestalpine Schienen, CRM Hong Kong Trading Ltd, Atlantic Steels, French company British Steel France Rail and China-based Angang Group International, according to reports that have not been officially confirmed. None of the firms were prepared to comment immediately.
The bids were opened on Friday, despite the Prime Minister's Office writing a scathing letter to the Railways after the global tender was floated on 28 November, asking all departments to give priority to domestic manufacturers, according to Business Standard. ''It is very disturbing that the broad message has not been appreciated by various departments,'' Prime Minister Narendra Modi's principal secretary Nripendra Misra said in the letter dated 10 December.
He added that each department should ensure that the tender conditions are strictly in sync with the public procurement order and each tender must be examined from the point of view of the interest of Indian manufacturers.
In a meeting on Thursday, an inter-ministerial committee on domestically manufactured iron and steel products in government procurement, headed by steel secretary Aruna Sharma, gave a waiver to the tender on condition that 20 per cent of additional procurement would be from domestic producers to boost Make in India.
The tender will end the monopoly of state-owned Steel Authority of India Ltd (SAIL) in supplying rails to the world's fourth largest rail network. Loss-making SAIL has struggled to meet railways' rising demand.
The steel and rail ministries have been at loggerheads over the state-run network's decision to buy rails from overseas despite assurances of supply from SAIL and New Delhi-based Jindal Steel and Power.
Following several meetings, the railways slashed its tender size by more than 30 per cent to 487,000 tonnes of rails after SAIL said it would scale up supply to 950,000 tonnes in 2017/18 and 1.5 million tonnes in 2018/19, according to the minutes of a committee meeting held on 21 December cited by Reuters.
Till now, the railways were procuring rails from government-owned SAIL. They decided on an extra global tender after anticipating that SAIL would not be able to supply the 717,000 tonnes required for 2017-18 and 2018-19.
SAIL later said after the bids were floated that it would supply well beyond this much. The railways went ahead with the bidding process despite opposition from the ministry of steel, which argued home manufacturers must get preference.
SAIL will supply the railways 1.5 million tonnes of rail in 2018-19. This global tender is now for 487,000 tonnes, worth an estimated Rs2,000 crore. The railways' plan is for 4,000 km of track renewal in each of the next two financial years, 2018-19 and 2019-20. The cost estimated on this for 2018-19 is a little above Rs10,000 crore.
The railways have planned a rapid modernisation drive, after a series of track mishaps. The ministry has a plan for investment worth Rs8.56 lakh crore in the next five years, of which Rs1.27 lakh crore will be on safety.
SAIL has increased its track output target midway during the tender, after a new Universal Rail Mill at the Bhilai Steel Plant came on track with an investment of Rs1,200 crore. The tender process was on when a standing committee of Parliament last month felt Indian steel companies could meet the needs of the country's railways.
A Rashtriya Rail Sanraksha Kosh (RRSK, a rail safety fund) has been proposed for the next five years. Of Rs53,000 crore that will be spent on the head of safety in 2017-18, about Rs20,000 crore will come from the RRSK. For the current financial year, the major outgo from RRSK will be for traffic facilities - yard remodelling and like heads (Rs 3,085 crore), rolling stock (Rs1,731 crore), road safety (Rs5,213 crore) and track renewal (Rs9,961 crore).