Jindal Steel & Power Ltd eyes Rs 1,000 crore order for rail tracks

27-Nov-2018

In what could be a boost to Jindal Steel and Power Ltd., the steel ministry may tell Rail Vikas Nigam Ltd to relax the tender conditions to buy rail tracks, allowing JSPL to qualify for bidding, people familiar with the matter said.

JSPL, which was originally looking to bag a developmental order from the engineering company under the railway ministry, can now look forward to qualifying for a much larger order of more than Rs 1,000 crore, the sources said.

The inability of Steel Authority of India (SAIL) to commit to RVNL’s requirements for the next few years, had forced the latter to explore imports.

Against its two million tonnes per annum capacity for rails, SAIL had said it could only supply one million tonnes this fiscal and 1.2 million tonnes in the next, before meeting RVNL’s entire requirement from the following year onwards after the completion of its ramp-up.

Hence, RVNL had requested approval from the standing committee constituted for providing preference to ‘domestically manufactured iron and steel products’ for an exemption from domestic procurement and to invite global tenders to import 5 lakh tonnes of rails (of 60 kg of 90 ultimate tensile strength).

In a meeting chaired by steel secretary Binoy Kumar, the standing committee had on November 1, 2018 agreed to let RVNL import a year’s requirement (or about 1.85 lakh tonnes of rail) with a rider that RVNL must place a development order of 20% with Indian manufacturers.

However, in a subsequent meeting of the Railway Board, it was noted that RVNL had specified a qualifying criteria of two years of rails being in use while the Indian Railways’ tenders only prescribed one year.

Taking this into account, the steel ministry’s committee pointed out that relaxing this condition would allow JSPL to qualify for the supply. It also noted that RVNL’s quoted minimum requirement of quantity was on the higher side.

“Hence, the very basis on which the standing committee took a decision to grant exemption for purchasing ‘rails’ from abroad has undergone a change and will require a review by the standing committee for which a meeting will have to be held again,” said the minutes of the meeting.

JSPL had told the committee that it had supplied similar rails, in use since more than a year, to Iran and Bangladesh. And, they could get certificates from them.

A review of RVNL’s tender conditions, as suggested by the minutes of the meeting, could potentially open a huge opportunity for JSPL, which hopes to trim its debt to Rs 36,000 crore by 2020.

The company had recently bagged a 20% developmental order (of 97,400 tonnes of long rails) from the Indian Railways.

JSPL, which operates a one million tonne per annum (MTPA) rail mill at its steel plant at Raigarh, Chhattisgarh, expects rail tracks to contribute to a tenth of its turnover in the coming years.

Source: THE ECONOMIC TIMES