A ‘lip-service' to wagon producers

Jayanta Mallick Kolkata | Updated on February 26, 2011


Three listed Railway wagon makers – Texmaco Ltd (now Texmaco Rail & Engineering Ltd), Titagarh Wagons and Cimmco Birla (currently Cimmco Ltd) – were rammed down on Dalal Street as market players thought the Railway Budget announcements for 2011-12 only gave negative indications in terms of their revenue growth prospects.

Mr Vishwas Udgirkar, Senior Director, Deloitte in India (Transport) told Business Line: “The Railway Budget offered a lip-service to procurement of wagons. The Railways Minister in her speech talked about this year's (2010-2011) ‘record' procurement of 16,500 wagons, which was still being done.”

However, she was silent on the fact that these 16,500 units included supply backlogs of 2007-08 (from Jessop), 2008-09 (Jessop and Besco – both unlisted) and 2009-10 (by all as the Railways only could release orders for the previous fiscal in September-October 2010).

According to analysts, the Railways payment schedule for wagons extends between 18 and 24 months.

Mr Saurabh Mukherjee, head of equities at Ambit Capital: Given the Railways Minister's proposals in the two consecutive budget speeches, the Ministry should move ahead with 8 PPP wagon-building projects and increase capacities. “Though five such proposals mooted had not progressed so far, but the implication for the listed private wagon makers is clear; wagon building industry would face overcapacity if the Railways cannot procure wagons in tandem with the capacity,” he added.

According to Mr Umesh Chowdhury, Director of both Titagarh Wagons and Cimmco Ltd, the payment from the Railway had not been a problem for the wagon manufacturers.

“But, few years down the line, if the plan for rolling out new capacities takes effect, under-utilisation of capacity is likely to occur, which in turn, will have cost implication for the manufacturers.

The freight loading target for 2011-12 has been set at 990 million tonne, which, according to Mr Chowdhury, would need higher procurement. According to Mr Ramesh Maheshwari, there is an apparent reliance on PPP growth mode.

Bigger procurement target of 18,000 for 2011-2012 would help wagon makers.

Published on February 26, 2011

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