Indian steel shortfall hits rail track overhaul plan

NEW DELHI, Nov 6 (Reuters): India's steel and rail ministries are at loggerheads over the state-run network's proposal to buy much-needed rails from overseas, a move that would undermine Prime Minister Narendra Modi's drive to build key infrastructure in India.

India's Ministry of Railways, which manages the world's fourth-largest rail network, has grappled with a spate of accidents. Modi's government wants to overhaul the country's aging tracks, but shortages of steel produced by state-run Steel Authority of India Ltd. (SAIL) have slowed progress.

The clash highlights the dilemma the government faces as it tries to promote local production through the "Make in India" campaign at the same time it faces resistance from some state buyers who need to procure goods as quickly and cheaply as possible.

Indian Railways issued a tender seeking 717,000 tonnes of steel rails on Oct. 18, which was the first time the state-run railroad operator sought overseas rails. The tender could be worth an estimated 30 billion rupees ($464 million) for global steel majors such as ArcelorMittal and Thyssenkrupp.

That amount will make up SAIL's shortfall for the next two financial years.

For the financial year for 2017/18, SAIL is expected to supply 920,000 tonnes, only 65 per cent of the target, according to a letter sent by Indian Railways to the Steel Ministry dated Oct. 18 and reviewed by Reuters.

In 2018/19, SAIL is expected to supply 1.3 million tonnes, falling short of 1.5 million tonnes sought by the railways, the letter showed.

"We require rails. SAIL is not able to deliver the rails. That's it," said Ashwani Lohani, the chairman of the Railway Board which manages Indian Railways for the Ministry of Railways.

He said Indian Railways had "no intention to change the tender", which is the first time the company ever sought overseas rails.

SAIL did not respond to requests for comment.

India's Ministry of Steel urged Indian Railways not to violate the "Make in India" policy that requires all infrastructure projects worth more than 500 million rupees to use locally-made steel.

In a meeting on Friday, Steel Ministry officials asked the railways to abide by procurement rules that require steel for major infrastructure projects to come from domestic producers, three people who attended the meeting said.