Jindal Rail Infrastructure Limited has won an arbitration award of Rs 18.35 crore from Indian Railways, the company said on Monday, after it raised a dispute over a wagon procurement order of the Railways.
Jindal Rail, which was the lowest bidder in the tender for wagons called in 2014-15, went for arbitration against Railways when the latter decided to invoke a clause of the tender that said it could increase or decrease the total order by 30 per cent. Sources in the Ministry of Railways said it had increased the order given to Jindal Rail by 30 per cent.
Jindal Rail was also aggrieved at the Indian Railways giving part of the wagon order quantity to the second-lowest bidder at a higher rate.
“The Hon’ble Tribunal, after perusal of the pleadings, and evidence led by the parties arrived at the conclusion that the Indian Railways have committed a breach of the contract by purchasing 496 BOXNHL wagons from Jindal Rail at a lower price than the market price. Thus, the Indian Railways are liable to compensate Jindal Rail for the loss or damage caused to Jindal Rail for such breach under Section 73 of the Indian Contract Act 1872,” the company said in a statement.
Officials in the Ministry said they would need to peruse the order for further action.
As per rules of the wagon procurement policy, Railways divides the entire quantity of wagons it needs to procure in a year into all qualified, participating wagon makers in India. This is because the wagon market has a monopsony of Indian Railways.
That is why, if it needs to buy around 10,000 wagons from private manufacturers in a year, the entire order quantity is divided among all the top participating firms, while the one with the lowest bid gets the biggest share.
The cost of a wagon crashed from Rs 16,83,000 in 2012-13 to Rs 12,50,000 in 2013-14. This, the industry gave feedback to Railways, was a very “tight price” leaving very little scope for profit.
In the following year’s wagon procurement tender, Jindal became the lowest bidder by quoting a price of around Rs 10,87,000 per wagon.
While it was given the majority order, problems arose when Railways asked others, like the second lowest bidder to accept its share of the order but at the price quoted by Jindal Rail, which the company refused as it had quoted a rate of Rs 13,15,000 per wagon, sources said.
When no bidder was willing to match Jindal’s rate, Railways, in order to cover its demand for a certain quantity of wagons, gave the order at a rate quoted by them.
It even offered to buy them at previous year’s rate of Rs 12,50,000 per wagon. This eventually led to the dispute between Jindal Rail and the Railways.