The partnership between United States-based wagon manufacturer FreightCar America and Indian wagon maker Titagarh Wagons is on the verge of break-up with the former threatening the Indian entity of pulling out of the joint venture agreement if it fails to perform assigned duties as per the arrangement between the two companies.
The two had entered into a joint venture agreement in January 2008 to construct wagons in India. The plan was to set up a wagon manufacturing unit in India through the joint venture company Titagarh FreightCar with an initial investment of $40 million. The equity participation of FreightCar America would be 51% while the balance would come from Titagarh Wagons.
As per the pact, Titagarh Wagons would get the approval for the prototype from Indian Railways and get orders for wagons, while FreightCar America would provide design and manufacturing technology. The manufacturing unit was to start production in 2009. However, even after more than three years of signing the agreement the joint venture has not covered any ground.
Industry sources told FE that Titagarh Wagons has still not submitted the prototype design to Indian Railways? technical arm Research Designs & Standards Organisation (RDSO) for approval. RDSO?s nod is a condition for applying for supply orders to railways.
Angry over the delay by Titagarh Wagons, FreightCar America has asked the former to clarify its position. Sources also said that the US firm has threatened of pulling out of the partnership if any further delay is caused to submission of the prototype design.
In the warning note sent to Titagarh Wagons? vice-chairman and managing director Umesh Chowdhary, FreightCar America?s president and chief executive officer Edward J Whalen has also accused the partner firm of causing the resignation of Annapragada Vidyavathsal, former managing director of the JV company, and delay in reimbursing employee expenses that lowered their morale. Neither Titagarh Wagons nor FreightCar America replied to email and fax sent by FE.
FreightCar America considers India as an attractive market for high-capacity rail wagons manufactured by it as Indian Railways is working toward increasing the loading capacity. It wants to procure 1.44 lakh wagons at an investment of R43,200 crore in five years to March 31, 2017 to meet the requirement of two dedicated freight corridors that are scheduled to be operational by then.
The business prospect in India has also driven other foreign wagon manufacturers to forge partnership with domestic players to get an entry. In 2007, Australia?s United Group signed a similar JV agreement with India?s Texmaco.