The acquisition of Corus by Tata Steel has, after nearly four decades, opened up an opportunity to the company to resume supplying steel rails to the Indian Railways, which coincidentally is preparing to launch a massive investment drive earmarking Rs10,000 crore to lay new tracks.
According to sources in the railways, the company representatives have held informal discussions with railways to see whether they can provide steel rails to the standards and specifications sought by the ministry.
Corus is a specialist rail steel-maker and Tata Steel now has the option of utilizing it’s UK acquisition to cater to the growing needs of the Indian Railways.
The company also has the technology for developing special rails such as high-speed rail and silent rails which apparently ensure less noisytrain rides.
When asked whether the company was keen on supplying rails, Tata Steel spokesperson, Sanjay Choudhari, told Mint that the Tata-Corus integration committee is currently discussing various opportunities wherein the companies can effect maximum synergies.
“Once these discussions are concluded, there will be more clarity on synergizing the capabilities for future growth including new areas of businesses that the company would enter using the integrated strength,” he added.
Tata Steel sources further said that at present the company does not have rail-steel mills in operation in India as it had discontinued the business decades ago.
If the company were to re-enter the segment, it will have to set up a new facility or import steel from Corus, a Tata Steel executive said.
Given the massive scale of projects that the Indian Railways plans to take up in the next five years, the demand for rails is poised to spurt. The eastern and western arms of the proposed dedicated freight corridor alone would require rails worth around Rs3,000 crore.
The railways has also announced that it planned to construct four more arms of the freight corridor and high-speed corridors. If all these plans were to materialize, the demand for rails would be in the range of around Rs10,000 crore at the least for these new projects.
For the last three decades, railways has been procuring steel from Steel Authority of India, which has remained an exclusive supplier despite there being no such clause in the agreements signed between the public sector company and the railways.
“Every year the railways signs an MoU (memorandum of understanding) with SAIL undertaking to buy a certain tonnage through the year,” said a SAIL spokesperson. According to the officer, the contract is merely renewed every year and since private companies have mostly stayed away from manufacturing rails, there was hardly no real competition. And, the only effort by a private company was spurned by the railways for their failure to measure upto the safety specifications.
“We have no problem in procuring rails from private companies so long as they are able to meet our stringent specifications. As of now, no private company has managed to cater to our needs the way SAIL does,” said a senior railway officer on condition of anonymity.
However, when it comes to steel supplies other than rails—for wheels and axles, structural works and sheets for coach-building—private players, including Tata Steel, too have a market share.