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In a first, railways set to adopt reverse bidding method for high-value orders

LiveMint logoLiveMint 07-09-2017 Jyotika Sood

New Delhi: Under pressure to reduce expenditure, Indian Railways has decided to adopt a reverse bidding process for high-value purchases, a first-of-its kind initiative by the national transporter.

The move is aimed at increasing competition for supplying goods and services to Indian Railways and cutting spending substantially. In reverse auctions, suppliers offering goods and services at the lowest price win the bid.

“The Indian Railways is currently in process of developing a software that would hold a platform for reverse auctioning,” a senior government official said on condition of anonymity. “First we would hold it on a pilot basis and then on a large scale.”

The reverse auction method would initially be used for high-value products include high-end equipment and parts for locomotives, coaches, electrification of railways and so on. The national carrier procures material worth Rs50,000 crore every year.

The move comes at a time when Indian Railways is increasing its capital expenditure (capex). According to a recent Citibank report on the performance of Indian Railways, railway capex increased 60% year-on-year in FY16 and 18% y-o-y in FY17. Physical commissioning of projects has improved sharply. Average commissioning of broad-gauge lines increased 86% in FY16-17 over average commissioning in 2009-14. Electrification of rail lines increased 58% in FY16-17 from the average in 2009-14.

The report also said that Indian Railways has reduced the average project approval duration to six months from an average of 24 months. It has also achieved 100% e-procurement.

“Introduction of e-procurement has helped to bring down corruption, but the ministry feels that still procurement rates are high,” a senior railway ministry official said on condition of anonymity. “So once we switch to reverse auction the competition will increase further and prices would fall leading to decline in our expenditure.”

At present several ministries including the power ministry and public sector undertakings are using the reverse auction to procure supplies at competitive prices, he added.

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