India, Iran Sign $2BN Deal for Rail Sector Cooperation

by on

Zerophoto/Adobe Stock

This development could bring some cheer to India’s Steel Authority of India Limited (SAIL), the state-run corporation that has a monopoly in the supply of railway tracks, and some of the domestic steel companies.

Need buying strategies for steel? Try two free months of MetalMiner’s Outlook

India and Iran recently signed a deal worth U.S. $2 billion dollars for cooperation in the rail sector. The agreement included a Memorandum of Understanding (MoU) worth $600 million that will enable Iran to purchase locomotives and freight cars from India. The new trains in Iran will help transport passengers and freight in Iran.

What’s more, they will also be used in the Chabahar-Zahedan railroad to accelerate development of the Chabahar Port, which will eventually connect to Central Asia and, ultimately, Europe.

Iran had recently announced the launch of the construction of the Mashhad-Zahedan railway. This is part of the plan to connect Central Asia with the Iranian port of Chabahar on the Indian Ocean coast.

According to news reports, the track-laying project covering 100 kilometers of Chabahar-Zahedan Railroad will be completed by March 20. Announced by Iran’s Deputy Minister of Roads and Urban Development Kheirollah Khademi in a meeting with Saurabh Kumar, Indian ambassador to Iran this week, Iran is said to have invested U.S. $300 million from domestic resources.

For its part, India’s financial input in the project shall be finalized soon.

The Chabahar port had improved transportation activities between the two countries and will open the door to transit cooperation with more Indian ports.

Steel experts in India said such a large order would obviously give a boost for the sector. But whether the order for rail steel eventually goes to SAIL or not remains to be seen. SAIL has already been under strain for not been able to meet its target vis-à-vis rail steel.

In fact, according to a report by news agency Reuters, Japanese company Sumitomo Corp. and India’s Jindal Steel and Power Ltd were among eight bidders competing for Indian Railways’ first global tender to supply 487,000 tons of rails. The other bidders were East Metals AG (a unit of Russian steel and coal producer Evraz), Austrian company Voestalpine Schienen, CRM Hong Kong Trading Ltd, New Delhi-based Atlantic Steels, French company British Steel France Rail and China-based Angang Group International, the report said, quoting an unnamed official.

If the tender process does go through, it will end the monopoly of SAIL in supplying rails to the world’s fourth-largest rail network. But the two ministries, Steel and Railways, have been at loggerheads over the state-run network’s decision to buy rails from overseas.

The Indian Railways had slashed its tender size by more than 30% to 487,000 tons of rails after SAIL said it would scale up supply to 950,000 tons in 2017-18 and 1.5 million tons in 2018-19.

Free Download: The January 2018 MMI Report

The rail tender has created a piquant situation for the Indian government since it has constantly stressed a “Make In India” policy, which encouraged government departments to prioritize the use of local products in state projects.

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.