Indian Railways wagon procurement to run on reverse auction track

Breaking away from its tradition of floating annual tenders to procure wagons, the Indian Railways is set to come out with a bulk tender for 38,000 wagons through reverse auction method. This is the largest ever wagon procurement of wagons by the Railways and is expected to take care of the additional railway requirement for the next two years.

Officials in the ministry of railways expect the reverse auction to save at least 10-20 per cent of the cost for the railways, on what otherwise is estimated to be Rs 80 billion tenders.

In a reverse auction, prices will typically decrease as the sellers underbid each other to obtain business from the buyer. The Railways had decided to go for reverse auction process from April 1 this year for high-value items — including wagons, locomotives and coach parts, signalling and track equipment. The national transporter expects to save at least Rs 100 billion a year through a reverse bidding process.  

The reverse auction proposal comes at a time when the Railways are planning to rope in more private players like coal and cement companies to own their wagons. A policy for these bulk consumers are being worked out as the national transporter wants to come out with a general purpose wagon policy before the commissioning of dedicated freight corridors in 2020. 

“Considering the higher demand, we are going for a bulk tender of 38,000 wagons for 2018-19 and 2019-20 to meet the rising demands. This will be done through online reverse auction process because of which we expect a savings of around 10-20 per cent on the expected cost. The bids will be floated within the current quarter,” said an official close to the development.

Though the ministry had targeted procuring of 12,000 wagons in 2017-18, it was brought down to around 7,000 on revised estimates. The cost of a normal 22.9-tonne axle load wagon is around Rs 2-2.2 million, while that of 25-tonne axle load wagon is around Rs 2.5 million.  The use of longer 25-tonne axle load capacity longer wagons is expected to increase, post the commissioning of Eastern and Western freight corridors. Officials expect that with an increase in demand for 25-tonne axle load wagons, the price per unit will come down.

For 2018-19, the Railways is set to invest around Rs 318 billion on rolling stock —  which includes diesel and electric locomotives, wagons and passenger coaches.

The Railways claim that the implementation of reverse auction will provide a level playing field to the Industry engaged in the supply of goods, services and works. For this, the Centre for Railway Information Systems (CRIS) has already developed new software. On an annual basis, the Railways procure goods worth around Rs 500 billion — including those for production and maintenance of rolling stock and also safety related works. Officials added that the new reverse auctioning process will comply with the government initiatives like Make in India and will not charge any additional fee from the users.