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Railways changes policy, PSUs to now compete in open market for tenders

In an order issued on Tuesday, the Railway Ministry withdrew the earlier policy, promulgated during the time of Vaishnaw's predecessor Piyush Goyal in December 2019, that had mandated that the Railway Board would first screen and award the work to eligible Public sector undertakings (PSUs).

Written by Avishek G Dastidar | New Delhi |
Updated: October 27, 2021 7:50:11 am
Ashwini Vaishnaw

Public sector companies, including those owned by Railways, will now have to compete in the open market with the private sector to bag railway contracts, the Railway Ministry under Ashwani Vaishnaw has decided.

In an order issued on Tuesday, the Railway Ministry withdrew the earlier policy, promulgated during the time of Vaishnaw’s predecessor Piyush Goyal in December 2019, that had mandated that the Railway Board would first screen and award the work to eligible Public sector undertakings (PSUs). The winning PSU would then float the tender among contractors in the open market for the actual work to be done. This policy had been in place so that Railways could get some price advantage through competitive bidding among PSUs.

Now, expanding on the benefit of price advantage, and doing away with the policy of protectionism that PSUs enjoyed, Railways has decided that instead of its board deciding which PSU should get the job, the zonal railways concerned would float open tenders directly in the market in which the PSUs can also participate.

Tuesday’s order, which withdrew the earlier policy, further stated, “All such work awarded under the existing scheme for which Letter of Award has not been issued or a Memorandum of Understanding signed or no major contractual obligation undertaken in any form, will also stand cancelled with immediate effect.”

Railways’ yearly capital spend has touched Rs 2,15,058 crore, of which over Rs 1 lakh crore was allocated in the General Budget.

Sources said that by doing away with one layer of limited screening, both time and money would be saved significantly in getting work done. “Besides, a lot of these PSUs are listed, which means that there are private players invested in them. By providing protection to them would basically mean protecting private interests as well in a roundabout way, which was not fair competition in the market,” a top source told The Indian Express.

Before 2019, the Railway Ministry would “nominate” one of its PSUs for a job, without any competition.

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