INDIA: The Ministry of Railways is seeking international investors to support the revitalisation of the domestic wagon building sector, with tenders to be called for the supply of around 100 000 wagons.
A tender is to be floated in Q1 of the 2022-23 financial year for the supply of more than 30 000 wagons/year over three years at an estimated cost of Rs350bn.
India’s domestic wagon building industry including firms such as Texmaco Rail & Engineering, Titagarh Wagons Jindal Rail Infrastructure and Jupiter Wagons has a nominal capacity of around 30 000 wagons/year, but has never supplied more than 15 000 in any one year. The ministry hopes that the scale of the global tender will result in attractive prices from economies of scale as well as competition between suppliers, and will provide an incentive for foreign investors to become involved.
The wagon procurement is also expected to support the government’s strategy to stimulate economic activity through infrastructure investment. It will help to ramp up production rates in the domestic heavy engineering industry, which has been struggling as a result of low demand.
The ministry is expected to adopt a ‘reverse e-auction model’, under which the second-lowest bidder may be assigned a portion of the order in the event of the lowest bidder not having the capacity to meet the full requirement.
Buoyant demand
With rail freight demand buoyant and a ‘post-pandemic’ uptick in industrial and consumer activities, Indian Railways is currently facing a serious shortfall in both rolling stock and line capacity on its arterial routes.
Freight loadings between April and December 2021 were more than 18% up on the corresponding period in 2020, from 869 to 1 028 million tonnes, and the strong growth has continued through January and February.
There is a sizable unmet demand, even among major bulk customers including the coal sector. Projected industry growth rates point to a further jump in loadings, while the completion of the two Dedicated Freight Corridors in the next year is also expected to stimulate demand for rail transport.
IR has budgeted to carry 1 475 million tonnes in FY2023, up from a latest estimate of 1 400 million in 2021-22. The 2022-23 budget envisages the acquisition of 13 000 wagons, up from 9 600 wagons in 2021-22, but insiders suggest this figure may be too conservative.
