‘Enter The Wagon’: Makers See Surge In Orders From Railways After Five Years 

India’s wagon industry has been seeing a massive increase in orders from the Indian Railways and this welcome development comes after a five-year-lull. While this development is undoubtedly positive, it should be noted that a rise in steel prices could dampen the profitability of the wagon makers.

It has been reported that orders showed a surge in the second half of the previous financial year at which time flat steel prices hovered around the Rs 40,000 a tonne level. However, barring a blip in August, prices currently are ruling at the Rs 46,000 a tonne mark.

However, the pressure on bottomline for wagon makers is expected to ease as the railways has corrected their contractual terms by which maximum priority would be accorded to steel costs. This is commensurate with the fact that steel contributes the maximum to the cost of making a wagon at 55 per cent of the total cost and corrects the previous anomaly in the contracts whereby labour costs were accorded highest priority.

One potential cause of concern that persists relates to the fact that the supply of spare parts has dried up with the closure of vendors like Stone India. A lack of serious demand in the previous years has meant that many of the existing vendors are finding it difficult to scale up spare parts production, thus adversely affecting the larger industry.