Railways suffers as cash-strapped cos fail to meet wagon delivery targets

A working capital crunch, coupled with lack of critical components, has slowed down the delivery schedule of railway wagons, affecting their availability with the transporter, a senior official said.

"Wagon manufacturers are the mainstay of the railways as 90 per cent of its requirement is met by the private sector. Till October 1, Indian Railways has received only 2,717 of the 12,311 wagons that had been ordered from 10 major players in April," the Railways official told IANS.

Thus, the manufacturers are expected to produce 9,594 wagons, each of which costs Rs 2.5 million, in the next five months, by March 2019, which seems to be a tall order, industry stakeholders said.

Expressing serious concern over the slow pace of delivery, the Railways has asked wagon manufacturers to improve the supply or face a penalty of two per cent of the value of the order as laid down in the contract, the official said.

According to industry sources, there are issues like lack of working capital and non-availability of critical components like bogeys, couplers, dropgear and airbrake systems from Research Designs & Standards Organisation (RDSO)-approved vendors.

While the price of steel has gone up around 20 per cent to 25 per cent in the recent past, there are also Goods and Services Tax (GST) issues.

Five per cent GST is applicable on wagons, while the GST on raw materials required for wagon productions is 18 per cent.

There are plans to approach the Finance Ministry to resolve the GST issue, industry sources said.

Meanwhile, the Railways has decided to opt for the reverse auction method to decide on its future tender for procurement of 21,758 wagons at an estimated cost of Rs 56 billion -- the largest such order for the national transporter.

The order includes nine types of wagons, including covered, flat, open and brake vans to be supplied by the successful bidders in the next two years.