A Big Leap From The Indian Railways

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In a move that will give a huge fillip to domestic wagon manufacturing industry, steel, casting, forging, machinery, raw materials supplying industries, paint industry, pipe industry, industries manufacturing couplers, draft gears, air brake and grease seals, transportation, manufacturing and other industries, the union ministry of railways has planned to procure 90,000 wagons in the next three years at an investment of close to ₹31,000 crore. The procurement plan for 90,000 wagons is historically the largest and is almost five times the wagons procured by railways in a year.

The process has started and the Indian Railways has awarded the largest tender of 20,067 wagons to Texmaco Rail and Engineering limited, to be supplied in 39 months for an order value of ₹ 6,450 crores. Entire manufacturing and supplies will be under Make-in-India policy.

The remaining tender for 70,000 other wagons will be awarded soon to other players.

Out of these 90,000 wagons, 42,000 wagons are meant for coal transportation, 40,000 wagons are for cement and foodgrains and the rest are for other goods.

One more interesting fact is that about 90 % of these 90,000 wagons are expected to be built in West Bengal, that too at a time when the wagon manufacturing industry of West Bengal was grappling with a low-capacity utilisation problem.

This is the highest-ever order from the Indian Railways, against the usual average wagon procurement of 13,000 units per annum by the ministry at a cost of about ₹4,000 crore. The wagon industry of India has a capacity of manufacturing 30,000 wagons a year.

Indian Railways has more than 3,00,000 wagons running on its network and is facing a massive shortage of coal carrying wagons due to increased demand from thermal power plants due to the summer.

Coal carrying wagons have their own story of woes. Private contractors used by power plants to unload coal are fast substituting manual unloading with JCBs. JCBs hit the interior of the wagons and damage them severely. This has resulted in a significant increase in the number of wagons that are damaged. The Railways have to do major, minor and local repairs. It cost the Railways more than ₹ 150 crore to repair around 2,179 wagons.

According to the official data, in January itself, 9,982 wagons were shown as damaged on January 1. The number increased to 10,687 by January 6. On January 11, the number of damaged wagons was 9,839. On January 21, it was 9,097. It came down to 7,267 on February 11 and rose to 7,531 on May 2. This is a costly affair also. To repair around 2,179 wagons, it costs the Railways more than ₹ 150 crore.

Similarly, Railways is also facing shortage of Food grain carrying wagons. Add to it, the opening of the 3300 km long Eastern and Western Dedicated Freight Corridors have further increased the demand of Container carrying wagons. As of now, the railway has a 27% share in goods transport and the last budget envisages to take it to 45% in the next few years, which further requires more wagon capacity. Broadly, this will require 20,000 wagons per year. According to the National Rail Plan of Indian Railways’, the Indian Railways will need over 5.44 lakh wagons by 2031. The National Rail Plan has also taken “capacity ahead of demand” as part of its vision, with an aim to make a ‘future ready’ railway system by the end of 2030.

In the budget for FY23, the railway ministry has targeted freight revenue of ₹1,65,000 crore up from ₹1,37,810 crore in FY22.

The government has been focusing on strengthening infrastructure, and over the next few years, Indian Railways is expected to come out with large contracts to upgrade both passenger coaches and wagons.

The railways’ plans to enhance its freight capacity from the current levels. The railway plans to enhance its freight loading from slightly less than 4 million tonne per day currently to over 5 million tonne per day.

This is an ambitious plan and the bulk tender is expected to provide cost advantage to the government and better visibility to the industry. With the current procurement plans, the wagon manufacturing industries will not only find an opportunity to grow, but also might have to enhance their capacity by 25 per cent.