IRFC monopoly to end with new wagon leasing plan

Written by fe Bureau | New Delhi, Feb 26 | Updated: Feb 27 2008, 04:26am hrs
Railway minister Lalu Prasads new wagon leasing policy allowing private companies to own and lease wagons is likely to result in global transportation majors making a beeline for the Indian entry. This is the next step towards larger private participation in rail freight business in the country.

The policy is also likely to give a big push to the wagon leasing market in the country. Market sources said transportation majors like Srei Infrastructure, GE and Mitsui were eyeing entering the Indian market in partnership with the Railways.

Under the new policy, companies from sectors like coal, automobiles, steel and cement companies will be the major beneficiaries as they will be able to take wagons on lease depending on their requirements.

The customised wagon will result in increase in goods carried per wagon, faster loading and unloading and lesser delay in transportation, resulting in major cost saving for these companies. The policy allows them to negotiate prices and schedule with private players rather than depend on the railways, could result in huge cost and time savings.

The new policy effectively ends the monopoly of the Indian Railways finance arm IRFC and could see new customised and special purpose containers entering the market in India.

At present, only Indian Railway Finance Corporation (IRFC) can lease wagons run on the railway system. Under the new scheme, a wagon leasing company will need to have a minimum net worth of Rs 250 crore for getting registration under the scheme. The policy also stipulates a deposit of Rs 5 crore as registration fee which will be valid for 20 years.

Under the new Wagon Investment Scheme announced during 2005-2006, the railways had already approved an investment of Rs 1,500 crore for procurement of 138 rakes from the iron ore companies. As many as 42 rakes have received by the railways with an estimated cost of Rs 500 crore. However, the utilisation of special purpose wagons depends on the whether rail transportation continues to be a preferred mode of transport for the commodities.