Railways begins talks with SAIL for coach factory

Written by Praveen Kumar Singh | Praveen Kumar Singh | New Delhi | Updated: Jan 16 2012, 06:33am hrs
Indian Railways has started negotiations with public sector Steel Authority of India Ltd (SAIL) for a Cabinet-approved project to construct a coach manufacturing factory at Kanchrapara. In what amounts to a deviation from the Cabinet approval, the national transporter has suggested a new shareholding ratio for the unit, wherein the Railways will own only 10% and SAIL 90%. In 2010, the Cabinet had approved a 26% ownership by the Railways.

Clauses on price discovery, procurement and maintenance are also to be discussed with SAIL. The project that got Cabinet nod included setting of the factory and procurement of 5,000 coaches over 10 years. The overall cost of setting up the factory and procurement thereafter is close to R11,000 crore. However, all that is to change as the Railways and SAIL are close to signing a memorandum of understanding on the project.

Senior government officials told FE that the MoU was to be signed in 2011 but former financial commissioner Pompa Babbar raised objections on the absence of price discovery mechanism as no bidding was involved. Now that she has retired and new financial commissioner (Vijaya Kanth) has joined, the MoU is likely to be signed soon, one of the officials said. Originally, the project was to be awarded through competitive bidding where a company that quotes the lowest price would have won.

The Railways did not respond to an emailed questionnaire. A SAIL spokesperson said, passenger coach factory, Kan, West Bengal for electrical multiple units with dedicated propulsion system is under discussion with the Railways.

As FE had reported in September, the Railways had last year offered the project to Bhel. In October, Bhel had given its nod in principle. We have not heard anything from the Railways since then, a senior Bhel official said.