SAIL has been forced to cut the contracted price of rails meant for Iran Railways by 7.3% after the country threatened to unilaterally walk out of a contract. As per the original terms, SAIL was to generate a revenue of R580 crore by supplying 1 lakh tonne of rails to the West Asian country, it would now get R42.5 crore less.
Sources said though SAIL was initially reluctant to renegotiate the contract, it could not hold the grounds as Iranian delegation that visited the country earlier this month refused to relent. As per the renegotiated price, SAIL would now supply the rails at R53,750 a tonne against R58,000 a tonne agreed upon earlier, leading to a revenue loss of R4,250 per tonne.
The Iranian delegation insisted on a price cut as it was “able to get rails at a cheaper price from Turkey and Europe” due to more than 20% depreciation of euro against the US dollar in the last six months and general fall in the international steel prices.
The delegation had also said the Indian rail manufacturer, Jindal Steel and Power, with whom a similar contract was simultaneously signed by the Iran Railways, had also indicated its desire to renegotiate and, hence, if SAIL does not reduce the price, the contract would be snapped.
An agreement was signed last year between State Trading Corporation (STC) as merchant exporter and SAIL as a manufacturer for export of 1 lakh tonne of rails to Iran, to be financed through the Centre’s line of credit.
In March, Iran Railways wrote to STC seeking to renegotiate the contracted price due to subdued steel price, saying it was available at cheaper rate, it may not be possible for them to go ahead with the contract without a price cut. The rails will be supplied form SAIL’s Bhilai plant.
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