The new rule will allow potential bidders to split revenue accruing from infrastructure and value-added services with the Indian Railways on top of the Terminal Charges and Terminal Access Charges shared, which are currently the criteria for awarding bids.
The Ministry of Railways is weighing plans to introduce a new rule for awarding bids for building Gati Shakti Cargo Terminals on Indian Railways land after aggressive bidding in some initial rounds of tenders resulted in a tie with all the bidders placing identical, highest price offers.
The new rule will allow potential bidders to split revenue accruing from infrastructure and value-added services provided at the terminal with Indian Railways on top of the Terminal Charges (TC) and Terminal Access Charges (TAC) shared, which are currently the criteria for awarding bids.
The Terminal Charges and Terminal Access Charges are levied by Indian Railways at its goods sheds/container rail terminals: when cargo comes on Railways-owned wagons, TC of Rs20 per ton (for bulk cargo) is collected and when it arrives on privately-owned wagons, TAC of Rs1.6 lakh per rake (for containers) per entry is billed.
For Gati Shakti Cargo Terminals set up entirely or partially on India Railways land, Railway will levy Terminal Charges and Terminal Access Charges similar to those being levied on Railways goods-sheds. These Terminal Charges and Terminal Access Charges will be shared with the Gati Shakti Cargo Terminal Operator (GCTO) according to the percentage quoted in the tender.
Bidders have to quote the percentage of Terminal Charges and Terminal Access Charges which they seek to claim from the India Railways for the traffic handled at the terminal, according to the criteria currently followed for deciding the tenders. The percentage offered has to be similar for both TC and TAC.
To illustrate, the Indian Railways E-Procurement System (IREPS) module has provision of “Percentage Above”, “At Par” and “Percentage Below” options for quoting rates.
For Gati Shakti Cargo Terminal tenders, only “At Par” and “Percentage Below” options are now valid. If a bidder quotes a rate “At Par”, then it would mean that he will take 100 percent of TC and TAC without offering a share to Railways.
On the other hand, if a bidder quotes a “Percentage Below” rate, it implies that the percent he has offered will be retained by the Railways and the balance will be taken by the bidder. For example, if a bidder quotes “10 percent below” rate, it implies that he wants 10 percent of the TC and TAC to be retained with the Railways and he will take 90 percent of the TC and TAC.
The bidder seeking the “minimum share of Terminal Charges and Terminal Access Charges” will be awarded the contract.
If two or more bidders quoted the same percentage, the decision to award the contract will be taken through a draw of lots.
In the case of at least three recent Gati Shakti Cargo Terminal tenders, including the one planned at Sankrail Goods Terminal Yard (SGTY) near Kolkata some 18 kms from Howrah, to be developed on 120 acres of Railway land, all the three bidders quoted “99.97 percent below” rate, indicating their willingness to let the Railways retain the entire TC and TAC.
“This resulted in a tie and in such cases, per the tender document, the bid is to be decided through a draw of lots. But many felt that this would be a funny way of finalising the tender,” said an industry source briefed on the matter.
This has put the Indian Railways in a fix on how to decide the tender.
Railway officials said that all the three bidders for the Gati Shakti Cargo Terminal at Sankrail – Container Corporation of India Ltd, D P World and Pristine Logistics & Infraprojects Ltd – have quoted 99.97 percent as this was the maximum percent permitted in the Indian Railways E-Procurement System for works tender.
Bidders were keen on sharing more than 100 percent as price bids for the Sankrail terminal. But, because it’s a works tender, the IREPS “does not permit or accept” more than 99.97 percent, said a Railway official.
“We are trying to introduce a new rule that the entity willing to share the most revenue with the Indian Railways over and above the Terminal Charges and Terminal Access Charges would be awarded the contract for 35 years,” he said, noting that this would necessitate a change in tender terms.
This revenue share will come from infrastructure created by the terminal operator such as storage facilities, silos, tanks, conveyer belt, decanting facilities, and other enabling amenities for cargo like rail/road weighbridge, truck parking and value-added services/facilities provided like warehousing, processing, and packaging.
The infrastructure created and value-added services provided should be made available to all users of the terminal on a non-discriminatory basis.
The Gati Shakti Cargo Terminal Operator will have the freedom to set the user charges/fees for value-added services/facilities per market conditions without any interference from Railways.
However, the use of value-added services facilities will be optional, and no customer will be forced to use those services or to pay for them.
Railway officials said that deciding the bids through a draw of lots was “dicey” and revealed that the IREPS software is set to be “modified” to allow bidders to quote more than 100 percent as revenue share.
The Railway Ministry, with the help of the Centre for Railway Information Systems (CRIS) – its in-house software developer – is planning to develop an additional software – earnings contract module – for Gati Shakti Cargo Terminal contracts. Currently, the IREPS has two modules for electronic tendering, one for works tender and the other for scrap disposal.
“The new module will be developed and the Sankrail tender may be discharged and fresh bids called. But this decision has not yet been taken. The future course of action is under consideration,” a Railway official stated.
In February this year, Pristine Logistics and Infraprojects won a deal to set up India’s first Gati Shakti Multi Modal Cargo Terminal of the Dedicated Freight Corridor Corporation of India Ltd (DFCCIL) by quoting ‘NIL’ share on Terminal Access Charges, thereby allowing Indian Railways to retain the full TAC.
New Rewari is also India’s first terminal awarded by DFCCIL for the movement of single/double stack container trains daily, connecting the National Capital Region Delhi to the major gateway ports of Mundra and Pipavav.
“With private entities agreeing to let the Railways take the full TC and TAC in the initial round of tenders, Railways has started getting ambitious. The Railways is now looking at allowing bidders to share more than 100 percent in price bids,” said a rail industry executive.
Explaining the reasons behind the aggressive bidding by private investors, the rail industry executive said: “The biggest challenge in building Gati Shakti Cargo Terminals is acquiring land, and that too contiguous land parcels which can be linked to the nearest rail head. This entails long lead times for building the terminal”.
“That challenge”, he said, “is not there if Railway land is available”.
“The linking distance to the nearest rail line is not much and the lead time for construction will be less in such cases and hence the terminal can be erected quickly,” he remarked.
The attractiveness for setting up cargo terminals on Indian Railways land has also increased significantly after the Union Cabinet last year cleared a new licensing policy for such land that entails levying lease charges at 1.5 percent of the market value of land per annum with annual escalation of 6 percent for 35-year lease.
This addresses the issue of land acquisition by private entities at exorbitant rates, hurting the viability of cargo terminals.
A second rail industry executive, though, was sceptical about the Railway Ministry’s move to allow bidders to quote revenue share over and above the Terminal Charges and Terminal Access Charges.
“Asking bidders to share money from their pockets for the rakes they owned when such facilities are available at goods shed run by Indian Railways at comparatively lower prices, will make the Gati Shakti Cargo Terminals less competitive,” he said.
Such a move, according to him, would defeat the purpose of maximising utilisation of rail assets for public good.
“A few people fighting for building Gati Shakti Cargo Terminals in certain locations because somebody wants to have a foothold there while somebody else wants to block that land and check rivals from coming there, is not what the Railways should be looking at,” he pointed out.
“The Railways should look at what kind of business it is going to get out of this. Suppose I say I will give you 100 percent or maybe even more, but I will bring only one rake, then Railways gets money out of that one rake only. Railways do not get money from somebody who will bring, let’s say, 30 rakes there. That is not optimum utilisation of assets,” he said.
Speculative bidding will help an entity block the Railway land for himself without doing any business. His only expense will be the land licensing fee of 1.5 percent to be paid to Railways.
“Indian Railways is a national organisation, a public carrier which is in the logistics business. Its aim should not be maximising profit, its aim should be maximum utilisation of assets wherever they are, and what best it can give to the public,” he said.
Referring to a tender scenario where all the bidders have quoted the same price bids with the winner picked through a draw of lots, he said that the entity that has been associated with the Railways for a long time, has demonstrated loyalty by giving steady business, that entity should be given preference over others while finalising the bid.
“But that has to be through a policy which is non-discriminatory and not through a monetary mechanism, to avoid litigation from those who lost out. I am not saying it should be left to the discretion of the Railways. There must be a policy to deal with such situations,” he said, adding that the utilisation factor should be used as a criteria while deciding bids.
“Otherwise, Railways can develop the terminals themselves and keep the entire money from TC and TAC,” he added.
