The Railways have used its monopsony position as the only buyer of concrete sleepers used on rail tracks to make 75 small and medium enterprises of the product to bend to its terms.
Taking a hit on their margins, the concrete sleepers manufacturers across the country have temporarily agreed to end their pricing row with the ministry. They will continue to supply sleepers at Rs 1,132 per sleeper for a period of three months, after which a new tender will be floated by the ministry.
Sources familiar with the developments said this means the Railways will have already bought its quota of sleepers for the year soon and so the manufacturers will have to wait for another year to get the new prices. Concrete sleepers, on which the rails are laid, are made of cement and steel. Owing to the increasing input cost, mainly steel, the manufacturers had demanded an increase in the price. However, rail minister Lalu Prasad threatened to blacklist the sleepers manufacturers for making such demands. The ministry had also toyed with the idea of canceling their contracts and asking the companies to vacate the lands.
?They are located on our land and they can?t be allowed to blackmail us. We?ll start manufacturing sleepers in our own railway units,? the minister said. ?We will continue supplying the sleepers at Rs 1,132 per sleeper for the next three months. But this leaves us with a margin of just 2.5% to 5%, depending on the location of the unit,? said a manufacturer who did not want to be quoted. Since the railways are the only buyer of the products it insists on the companies setting up their production centres near the lines. This makes the units almost captive ones. ?We are on the railways? land and they are our only buyer. How can we form cartels? Also, unlike the casting units, we cannot manufacture anything else in our factory,? said another manufacturer. The manufacturers supply sleepers worth Rs 1,500 crore annually to the railways. Around a crore sleepers are supplied annually. A majority of the manufacturers have their unit on the railways? land.
A mail by FE asking for the ministry?s response on the pricing tussle and plans to relocate the manufacture of sleepers to the railways? own factories went unanswered. Setting up of a sleeper manufacturing unit requires an investment of upto Rs 10 crore. The working capital requirements for a sleeper manufacturing unit range between Rs 5 crore and Rs 10 crore. An amount of Rs 40 lakh to 50 lakh is spent on replacement and maintenance. The crux of the problem is the insistence by the ministry that there should be uniform rates of the sleepers across the country. But companies say they cannot supply at a uniform rate when the input cost varies from place to place. Also, raw material prices, manpower prices have gone up substantially, said a manufacturer.
As per the tenders to set up sleepers unit, it was mandatory to set up the units where sleepers were required. ?Normally an industrialist will put up a factory at a place where the raw materials are cheap and readily available. Now, there will be difference in the pricing of those who have raw material source nearby compared with those who source raw materials from far away places,? he said.