The railways sector is one of the high-growth areas in India, so far as infrastructure is concerned.
Much of it still runs on a setup that its former colonial ruler, the British Empire, left behind, and then some.
In a bid for modernization, which includes a bullet train, India wants steel for new and replacement rail tracks, wagon wheels and so on.
There are billions of dollars worth of contracts to be given out, but there’s a problem.
There are barely two domestic companies who can provide what the Indian Railways (IR) wants.
Unlike some other countries, where rail networks are private corporations, the one in India — founded in 1845 and in the top five of largest networks in the world — is run by the government’s Ministry of Railways.
The railways has set target of track renewal of more than 15,000 km by 2023, of which about 2,000 km will be completed during the current financial year, and the rest in the next four.
Yet, because of the lack of steel suppliers, these plans may be hampered.
After placing an order to import an estimated five lakh tons for the current financial year, the railways recently wanted an exemption from the government for another 400,000 tons for the remaining four years.
The IR may have a strong case for its move to call in foreign bidders, but its request has elicited a rebuke by the government, who has been pushing its “Make in India’”program since it came into being nearly five years ago.
The government now wants the IR to provide details about its long-term expansion & renewal plans, the Times of India reports. The government wants more of the IR projects given to domestic steelmakers, pointing to some other nations where steel for such projects are procured from the local market.
The Railways, on the other hand, says there are only two, of which one, the Steel Authority of India (SAIL) has been persistently falling short of manufacturing targets. The other is private company Jindal Steel and Power Ltd (JSPL).
Until July 2018, when JSPL got its first rail supply project, SAIL was the only supplier of rails in India. The former was asked to supply 100,000 tons of rail track, and later in the year bagged an additional order for supply of 30,000 tons.
A couple of years ago, the IR was granted an exemption from the mandatory local sourcing clause for procuring steel rails. However, that was given when SAIL had expressed its inability to meet the entire requirement of the IR.
Now, once again, JSPL has emerged as the lowest bidder for a 450,000-ton railway order, beating none other than ArcelorMittal, the New Indian Express reports.
In fact, at a recent meeting of the Railway Board, concerns were raised over SAIL’s supply crunch. In short, supply are wheels and axles, which SAIL said was due to production glitches.
The supply crunch, with the fact that there’s only one other domestic supplier, has come in the way of the IR’s ambitious plans.