Indian Railways plans separate pricing mechanism for steel rails

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The government might have a separate pricing mechanism for procurement of rails from private steel companies by Indian Railways (IR).


According to multiple sources, the ministry of steel will be taking a decision on this. IR had in 2018-19 procured 100,000 tonnes of rails from Jindal Steel & Power (JSPL), the first from the private sector in at least three decades. Early this year, JSPL won another order, for Rs 665 crore from Rail Vikas Nigam Ltd (RVNL, a company under the railways ministry) to supply 89,042 tonnes of rails.


Traditionally, state-owned Steel Authority of India (SAIL) had a monopoly on supply to IR. The Railway Board signs an annual deal with SAIL, on quantity and pricing. 


A RVNL official told Business Standard that a separate pricing mechanism will be in place, with the railways and steel ministries, and the private party, jointly deciding on pricing. He added that regular supply from JSPL was likely to start from March.


The railways are mulling whether to issue a new global tender to procure rails or to invite an Expression of Interest from international steel majors to set up manufacturing units in India for this. Of the total requirement of 1.7 million tonnes (MT) by the railways, SAIL has assured around 1.35 mt.  


SAIL and IR are also in dispute on the quality of rails supplied by the former. The Railway Board was given a report by a team of experts from the University of Illinois, headed by a Christopher Barkan, that the tensile strength of existing tracks was “not adequate” for a 25-axle load. The report asked for increasing the tensile strength from 880 mega pascals (MPa) to 1,080 MPa. The government had set up a three-member panel on the dispute between IR and SAIL.


According to another source, the government has now asked SAIL to increase the tensile strength to 1,175 MPa, to ensure safety of passengers. Asked about this, a senior SAIL official said on condition of anonymity, “SAIL is currently in discussion with IR to ascertain requirements for different grades of rails, including 1,175 MPa. Based on these, SAIL will fine-tune its production plan.”

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