In a move that displaces Indian Railways from the position of being the sole buyer of general purpose wagons in the country, the government has decided to allow freight clients to buy and then offer them to the national transporter.
Informally termed the “buy your own wagon” policy, it allows Indian Railways’ clients, both in government as well as private sector, to purchase wagons from the market to rid themselves of any wagon shortfall the transporter might have in a certain sector at a particular time of the year. Unavailability of rakes (a collection of wagons pulled by an engine) is a pet peeve of freight customers at various times of the year.
Railways has also decided to offer clients a 10 per cent rebate in freight rate for 15 years to clients who bring their own wagons.
It applies to general purpose wagons — as opposed to special wagons and containers — which form the lion’s share of the wagon stock in the railway system. They are both open wagons and box-type closed wagons of various specifications.
The wagon business being a monopsony market, wherein there are many sellers but only one buyer — Railways — this is the transporter’s way of letting the market take care of its wagon needs wherever the transporter is constrained to offer its wagons. In 20017-18, Indian Railways procured 8,000 wagons. Each wagon costs around Rs 30 lakh. Indian Railways has a fleet of around 2.8 lakh wagons in circulation. The box-type wagons forms bulk of the fleet at around 1.26 lakh wagons.
“Following interactions with major stakeholders, we have decided to go in for large-scale induction of wagons to meet the growing demand for different sectors,” Railway Board Member (Traffic) Mohammad Jamshed told The Indian Express.
“Through this policy, we are looking for private investment in general purpose wagons to augment our fleet in addition to our own enhanced wagon procurement plan,” he added.
Sources said Coal India, and cement manufacturers — both forming the majority share of railway freight basket — have already evinced interest in the new policy.
There are certain riders. For instance, the wagons of rakes will have to be procured from the sources approved by Railways to meet the technical standards. Moreover, clients will have to take route-specific permission from Railways before buying them. This is to ensure that Railways does not commit to running client-owned rakes in routes where the capacity is already choked with its own rakes and passenger trains.
Moreover, the freight rebate offered under this policy cannot exceed the amount Railways pays to Indian Railway Finance Corporation (IRFC), its borrowing arm, as wagon lease charges every year per wagon. It is the IRFC which buys the wagons and leases them to Railways. Railways pays an amount to IRFC which is a mix of interest and principal towards each wagon till the loan against each wagon is paid off.
At present, private clients invest in special type wagons, mostly containers to carry on the railway network.