Date:06/08/2007 URL: http://www.thehindubusinessline.com/2007/08/06/stories/2007080651650300.htm

Back Railways finalising wagon lease policy

Mamuni Das

New Delhi, Aug. 5With the Indian Railways in the process of firming up wagon leasing policy, firms other than Indian Railway Finance Corporation (IRFC) can lease wagons to be run on railways system.

While various options are being examined for the policy, the Railways is essentially looking at players other than IRFC who can invest in special kinds of wagons and lease them to those customers of Railways who have use for such wagons.

This is because general purpose wagons have a higher utilisation guarantee than special purpose wagons. “In case a particular commodity ceases to use trains as its transport mode, then Railways can use the general purpose wagons for moving another commodity,” said sources, adding that the Railways would prefer to continue letting IRFC only to invest in general purpose wagons.

Special wagons

Now, the utilisation of special purpose wagons depends on the whether rail transportation continues to be a preferred mode of transport for those specific commodities. For instance, special tank wagons with suction arrangement for moving cement would have higher demand when cement companies use rail transportation.

Incidentally, cement firms can lower their transportation cost by investing in these wagons and getting certain freight discounts under the wagon investment scheme. Meanwhile, a leasing firm can procure these special wagons and lease them to different cement companies for use.

Now, while Indian Railways wants to limit its role as a facilitator between the lessor (wagon leasing firm) and lessee (rail customer), the lessors want a certain level of comfort from the Railways in the agreement.

Only Indian Railways can provide this comfort because the wagons would be in use in the railway system only. “So, in case the agreement fails or the lessee defaults, then Indian Railways should step in and not allow the lessee to use the wagons,” said sources.

IRFC’s role

In a related move, IRFC, which has been approached by several Railway customers (like steel and coal companies) with proposals to raise finance and lease wagons to those firms, has also sought a similar letter of comfort from the Railways.