Public sector steel companies RINL and SAIL have resolved their dispute over supply of forged wheels to Indian Railways, agreeing to share the orders from the national transporter.
Public sector steel companies RINL and SAIL have resolved their dispute over supply of forged wheels to Indian Railways, agreeing to share the orders from the national transporter. SAIL had objected to RINL’s plan to set up a forged wheels manufacturing unit at Rae Bareli in Uttar Pradesh and be a co-supplier to the railways notwithstanding the fact that the former has a plant in Durgapur. RINL’s proposed unit is backed by an assured off-take deal signed with the railways in 2014. The plant is to be operational by September 2018. At the behest of the steel ministry, the two PSUs recently met and agreed that SAIL will not invest further to ramp up its existing capacity. This is to ensure that RINL’s R1,600 crore upcoming plant can co-exist with SAIL’s and both the units are viable.
RINL has also agreed to suitably revise the assured off-take opportunity for the first three years from 2019-20 to 2021-22 in its agreement with the Railways. RINL will also not go for any further investment for augmenting the capacity beyond one lakh units unless demanded by the Railways. The source said both SAIL and RINL would supply LHB wheels to Railways meeting their demand expeditiously ensuring no import of forged wheels by Indian Railways from 2019-20 onwards. RINL would develop the design for metro wheels for production. However, they have kept the export potential open for themselves. At the centre of the discord was Indian Railways’ projected requirement of forged wheels. The Indian Railways might consume 72,200 wheels in 2017-18, which can go up to 1,04,500 units by 2020-21 and further to 1,30,000 wheels by 2023-24.
Currently, the railways buys 48,000 wheels from SAIL, and imports the remaining. SAIL, which is not running the unit with full capacity, however, can enhance its forged wheel capacity to 1,00,000 units with a minor investment. “With the total installed capacity being 1,70,000 units of forged wheels per annum, even with 80% capacity utilisation of both SAIL and RINL, the wheel availability will be more than Indian Railways’ projected demand up to 2023-24,” a source said. RINL has already entered into commercial contracts with various agencies including the main technological equipment supplier for the plant and execution of the plant is in full swing. It has already completed work worth over R115 crore and opened the R690 crore irrevocable letter of credit (LC). Any rescheduling of the project will have a huge commercial implications and viablity of the project.