The first tender result for railway wagons for 2015-16 has thrown up a surprise than a routine order prospect for the rolling stock manufacturing industry.

A bidder, according to industry sources, has quoted a price 10 per cent lower than the previous year’s average for all the 8,509 wagons. “As others have quoted 10 to 15 per cent higher price than the previous year’s average, according to the norms followed by the Railway Board, the lowest price would stick”, said the CEO of a leading wagon manufacturing unit. This not only queers the pitch for pricing for the open and covered types of wagons mainly used for iron ore, coal and foodgrains, but also raises issues over supplies as the lowest bidder has significantly lower capacity base.

‘Not viable’

Industry insiders said the price trend set by the lowest bidder this time was “not viable” for the industry. “This undercut price would cause loss to the supplier and create an unsustainable demand proposition for the industry. The Railways, on the other hand, may not be able to procure enough wagons”, said the operations head of another manufacturer.

The usual practice for such tendered supplies is that the Railways supplies steel to the wagon manufacturers, which charges a conversion price for making the finished products.

Inadequate orders

Indian wagon manufacturing industry has a capacity of producing around 25,000 wagons a year and historically depends on Railways for orders. However, in the past few years, inadequate orders from the Railways have caused considerable under utilisation of capacities. The orders from other than the Railways have also been rare. Only a few could manage exports and diversification into other structural and engineering products.

Industry sources said the Railways did not float any tender for wagons in 2012-13 and 2013-14. In 2014-15, it ordered for 13,849 wagons in various tranches.

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