In a move that would boost the revival of cash-strapped public sector engineering companies, the Union railways ministry has decided to slash the working capital burden on suppliers of wagons.
Wagon makers will be in a position to slash their interest costs as the rail ministry has decided to include bogies and couplers in the list of free-supply items.
In other words, the ministry will supply bogies and couplers to wagon makers by deducting the cost of these two crucial raw material from the expected price, instead of asking the makers to buy them from the open market.
More From This Section
The earlier procedure placed a burden on wagon makers, as payments for such supplies (bogies, couplers) had to be made upfront while Railways cleared its bill many months after the purchase. This imposed large interest costs on the wagon suppliers.
Bogies and couplers were excluded from the free supply items in 1995-96. Till now, only wheels, bearings and axles are under free supply deal.
Top ministry sources said the decision, which is expected to be announced this week, would help government-owned wagon manufacturers overcome their working capital related problems to a great extent.
Along with this decision, the ministry has decided to procure, over the next two years, 23,000 wagons (or nearly 90 per cent of the total procurement) from units of government-owned Bharat Bhari Udyog Ltd -- which has in its fold Burn Standard, Jessop and Braithwaite.
It has also been decided that the ailing Indian Iron and Steel Company (IISCO) will be the preferred supplier of steel to wagon makers. Other suppliers include Steel Authority of India Ltd (Sail) and Rashtriya Ispat Nigam Ltd (RINL).
The twin decisions -- inclusion of bogies and couplers in the free items and placement of a large chunk of order for wagon procurement with PSEs -- would help railway minister and Trinamool Congress leader Mamata Banerjee woo voters in the forthcoming West Bengal assembly elections.
Ever since Mamata Banerjee resumed office as railway minister in Delhi, the CPM-led Left Front ruling coalition in West Bengal has been criticizing her for not initiating moves to "revive the sick PSEs" in the state.
Political observers say Mamata Banerjee, who had been caught off-guard before the Calcutta Municipal Corporation elections when the Center announced closure of four PSUs in West Bengal, will not take a chance this time. She will try to exploit political mileage from this decision.
Ministry sources said the "political compulsion" has led her to place 90 per cent of wagon procurement order with government-owned wagon makers despite opposition of the Railway Board which wanted orders to be placed for less than 23,000 wagons.