The Hindu Business Line : Why wagon supplies remain off track

Wagon manufacturers want the Railways to firm up ordersat least 90 days ahead of the beginning of the fiscal to allow lead time for the supply of free items so that the actual work can start in April each year. This will help them save precious time and prevent delays in delivery.

Wagon manufacturers want the Railways to firm up orders at least 90 days before the beginning of the fiscal to help them start work early and prevent delays in delivery.

THE Railways has floated a tender inviting bids from manufacturers, both in the private and public sectors, for supply of wagons in the coming financial year. In all 9,856 wagons (in terms of vehicle units) are to be procured in 2005-06.

These will include BOY (400), BOBSN (100), BCNA HS (3020), BOXN HS (2720), BOST HS (460), BRNA HS (796), BOBRN (420), BTPN (680), BOBYN (1000), BRHNE HS (160) and BVZI (100).

One interesting feature of this year's tender is that the Railways has included bogies and couplers in the list of free supply items, that is, items supplied by the Railways free of cost to the wagon manufacturers. By doing this, the Railways revives an arrangement that was discontinued some years ago.

In 2004-05, the Railways placed orders for 8255 wagons (in terms of vehicle units) — 5622 units with private firms and 2633 with public sector units. Since there was a backlog of 5417 units (private sector 2014 and public sector 3403) from the previous year (2003-04), fiscal 2004-05 actually started with an order of 13,672 units (7636 units private sector and 6036 public sector).

Till December 31, 2004, the actual despatches were 5105 units — 3927 and 1178 units respectively. In other words, the private sector executed 51.4 per cent of the orders it had on hand and the public sector 19.5 per cent; the total order executed was 37.3 per cent.

If this trend persists, the current fiscal will end up with a total dispatch of 6807 units — 5236 and 1571 units respectively. In other words, 2005-06 too is likely to start with a backlog higher than that in the beginning of 2004-05.

This is not surprising. Almost every financial year starts with a backlog higher than that in the previous year. Thus, 2003-04, started with an opening balance of 1977 units — 540 and 1437 respectively.

Fresh orders were placed for the year for 8572 units, 4859 and 3713 units respectively. Thus, the fiscal 2003-04 started with a total order of 10549 units but 5417 of them remained undelivered till March 31, 2004. The fiscal 2004-05 thus started with a backlog of 5417 units. The private sector wagon-builders include Texmaco, Titagarh Steel, Besco, HEI and Modern Industries and those in the public sector are Jessop, Burn Standards (two units at Howrah and Burnpur in West Bengal), Braithwaite, Bridge & Roof, and Bharat Wagons (two units at Muzaffarpur and Mokama, Bihar).

One reason for this steadily rising backlog of course is the not-so-satisfactory performance of the public sector companies. These companies get a sizeable portion of the total orders, more than 40 per cent, but fail to execute them due to a variety of factors. But a more important reason for the mounting backlog is the failure of the Railways to place the orders in time.

The wagon manufacturers want the Railways to firm up orders at least 90 days ahead of the beginning of the fiscal to allow reasonable lead time for the supply of free items so that the actual work can be started in April, that is, right at the beginning of the fiscal. However, that never happens. As a result, the manufacturers lose precious production time which cannot be recovered during the remainder of the year, also because of the delay in the delivery of the free supply items.

For example, the closing date for the tender floated for the procurement of wagons in 2003-04 was December 30, 2002 but the actual order was placed on May 19, 2003, that is, nearly five months after the closing date and more than one and half months after the beginning of the fiscal.

Similarly, the closing date of the tender floated for procurement of wagons in 2004-05 was January 9, 2004 but the actual orders were placed on May 21, 2004. The closing date for the tender floated for procurement of 2005-06 is February 18, 2005. When will the actual orders be placed is of course anybody's guess.

The delay not only hits the manufacturers but also the Railways which stands to lose substantial revenue because of its inability to place enough wagons in a situation marked by very high demand for them.

A section of wagon manufacturers, therefore, emphasises the need for introducing a foolproof system whereby a calendar or time-table should be prepared with firm dates for placement of orders not only for wagons but also for locomotives and coaches such that the dates are made as inflexible as the date for the presentation of the Union Budget.

Also, the dates should be made public so that every constituent, including the private suppliers of various components to the Railways, know them well in advance and prepare themselves accordingly.

The wagon manufacturers, in general, are not excited over the inclusion of bogies and couplers in the list of free supply items. "As the situation stands now, the dependence on the Railways for the supply of inputs should be as little as possible," is the common refrain. "More dependence means more delay, greater complications and as a cumulative effect of all this, larger backlog," they say.

If at all, the Railways, it is felt, should stop supplying any free item. Let the manufacturers procure on their own whatever inputs they need. If allowed, they will perhaps do it more efficiently than the Railways and in the most cost-effective way, ultimately benefiting the Railways and its users. The wagon prices might even drop. Who knows?

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