Railway PSUs to compete with private companies to get contracts from open market

New Delhi, India (Urban Transport News): The Ministry of Railway (Govt. of India) has decided that public sector undertakings (PSUs), including those owned by Indian Railways, will now have to compete in the open market with the private sector to bag contracts. The ministry has issued order after modifying its policy on awarding tenders. 

In its order issued on October 26, 2021, the Ministry withdrew the earlier policy, propagated during the time of 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) owned by the Indian Railways.

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 Indian 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, Indian Railways has decided that instead of its board deciding which PSU should get contract orders, the zonal railways concerned would float open tenders directly in the market in which the PSUs can also participate in line of private companies.

The 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."

"This in effect cuts out a layer in the process which will save both time and money. It also will weed out corruption and even monopoly of certain groups," an official said.

Indian Railways' yearly capital spend has touched Rs 2,15,058 crore, of which over Rs 1 lakh crore was allocated in the Union Budget. Before 2019, the Ministry of Railway would "nominate" one of its PSUs for a work, without any competition.