New Delhi, Feb 24 The Railways has emerged as the likely front-runner for takeover of the Rae Bareli forged wheel unit of Rashtriya Ispat Nigam Ltd (RINL), officials involved in discussions told businessline. While the Railways has agreed “in-principle” to take over the unit and ramp-up capacities, discussions are on regarding the “consideration” for such a “transfer”. 

RINL is a CPSE under the Steel Ministry. 

The proposal is likely to be placed for Cabinet approval “soon”, officials across the two ministries said. 

There could be an outright purchase, or an outsourcing agreement (payment made depending on production basis), or “any other form of agreement, details of which are being finalised”. 

RINL’s forged wheel plant at Uttar Pradesh has already seen an investment of over Rs 2,250 crore. The plant has an installed capacity of 80,000 forged wheels annually, and was commissioned in 2021.

Although initial orders for around 2,000 wheels was delivered in FY23, “the plant is unable to operate at full capacity for several reasons” it was noted at internal meetings across ministries. It was also held that the company does not have the requisite expertise to ensure profitability of operations there. 

The Railways internal projections state that it can take up production of 40,000 units in the first phase, and by 60,000 in phase two, with the excess stock being exported in future. A turnaround of the unit is also projected in the next few years.

“It is a high-cost plant simply because the forged wheel unit is unable to produce more than 10,000 units annually (on a run-rate basis). But, as numbers increase, there will be economies of scale. Some investments could also happen in the coming days,” an official said. 

While piecemeal disinvestment of the forged wheel unit is expected to help bring down debt levels at RINL, which stood at Rs 20,400 crore in FY23 (as per the company’s annual report), a takeover by the Railways will help the Ministry bring down its annual import bill. 

Forged wheel imports

Indian Railways has been importing various types of forged wheels required for locomotives and coaching stock (LHB) since the 1960s from the UK, the Czech Republic, Brazil, Romania, Japan, China, Ukraine and Russia. Due to the Russia-Ukraine crisis, all wheel import requirements are being met from China, sources said.

In FY23, 80,000 wheels, estimated at Rs 520 crore, were imported from China & Russia, with the remaining 40,000 being sourced from SAIL, which supplies at an average rate of Rs 1,87,000 per tonne. 

Domestic capacity at SAIL is 40,000 wheels, which will be ramped up. 

“The requirement of wheels is projected to increase to 200,000 by 2026 onwards due to the induction of more high-speed trains,” a Railway official said.

The Ministry has already approved a project – a consortium of Ramkrishna Forgings and Titagarh Wagons – to manufacture 230,000 units (excess production being used for exports).