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Railways rejects private train bidder's plea to revise net worth criteria

A bidder had suggested to reduce the minimum net worth requirement to 25% of the indicative project cost as it would encourage competition

Nirbhay Kumar | August 4, 2020 | Updated 16:04 IST
Railways rejects private train bidder's plea to revise net worth criteria
Nearly 16 companies including GMR Group, Sterlite Power, Bharat Forge, RITES, CAF took part in the pre-application conference on running private trains

Key Highlights

  • Railways has declined bidder request to lower net worth criteria for participating in tender for private trains
  • Some bidders had suggested to reduce the minimum net worth requirement to 25% of the indicative project cost
  • The due date for submitting initial bid is September 8, 2020 but many private firms are expected to seek extension
  • Nearly 16 companies including GMR Group, Sterlite Power, Bharat Forge, RITES and CAF took part in the pre-application conference

Indian Railways has told prospective bidders for private trains that it will not review the net worth criteria for participating in the tender process. On demands that Railways could reduce the net worth criteria from 50% of the indicative project cost, the national transporter has responded saying "no change contemplated."

In the pre-bid meeting held last month, some of the prospective bidders argued that net worth criteria is generally lower in public private partnership (PPP) projects, and hence conditions for private trains should be in line with this.

As per the request for qualification (RFQ) document, a private entity participating in the tender for private trains should have a minimum net worth of Rs 1,165 crore (Cluster 1) which comes to 50% of the indicative project cost at the close of the preceding financial year.

A bidder suggested to reduce the minimum net worth requirement to 25% of the indicative project cost as it would encourage competition and ensure higher revenue share for the Railways. The national transporter, however, declined the request in its response to pre-application queries by the bidders. It also clarified that financial capacity (net worth requirement) needs to be fulfilled for each project on an individual basis, and independent of the other RFQs.

Hoping to earn Rs 30,000 crore from privatising train operations, the Railways has invited global tender from companies to run trains on 109 routes. It held the first pre-application conference with prospective participants on July 21 to respond to bidder queries. The due date for submitting initial bid is September 8 but many private firms are expected to seek extension in the wake of lockdown in cities such as Kolkata, Mumbai and Chennai.

Nearly 16 companies including GMR Group, Sterlite Power, Bharat Forge, RITES, CAF took part in the pre-application conference on running private trains. "It is difficult to collate all information, study them and submit applications within such a short time frame. Due to lockdown, holding meeting or brainstorming is difficult and hence we would request for more time," said an executive of a private firm planning to bid.

During the pre-bid meeting last month, some of the bidders are learnt to have requested Railways to allow private operators flexibility to modify train frequencies as per traffic and demand. Demand for permission to cancel a train in the event of low booking was also put forward.

In response, the Railways has said that it will provide clarity on key issues at the second stage of bidding or while signing concession agreements. The private trains are proposed to run in 12 clusters across the railway network. Each train will have a minimum of 16 coaches and designed to run at a speed of 160 kmph.

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