The breakdown in talks between Russia’s Transmashholding (TMH) and Rail Vikas Nigam Limited (RVNL) might compel the Indian Railways to re-issue its tender for the manufacture and maintenance of 120 Vande Bharat sleeper trains, the Money Control reported on Monday (19 June).
According to the report, the TMH-RVNL joint venture (JV) is yet to sign a contract with the Ministry of Railways to manufacture 120 Vande Bharat train sets, each costing nearly Rs 120 crore.
Quoting a government official, the report said that the Railway Ministry is under pressure from the Ministry of Finance to wrap up negotiations for the deal by the end of the first quarter of 2023-24, in order to avoid delays or look to issue a new tender.
Controlling Stake
Earlier in March 2023, Indian Railways had awarded the contract for the manufacture, supply, and maintenance of 120 trains at the Latur facility of the Indian Railways to the TMH-RVNL consortium after it emerged as the lowest bidder (L1).
The contract valued at around Rs 36,000 crore includes the cost of maintenance for 35 years.
However, to prevent any delays in execution due to the US sanctions on Metrovagonmash, a division of TMH, the Indian government had requested RVNL to become the majority shareholder in the JV.
On 22 May the US had imposed sanctions on Metrovagonmash which specialises in manufacturing rolling stock for the Railways. It is also responsible for the maintenance of the rolling stock and spare parts.
To be fair, as per the memorandum of understanding (MoU) signed by RVNL and Metrovagonmash before bidding for the tender, the latter held a 70 per cent stake in the JV, while Russian train control systems producer LES held 5 per cent, and RVNL, the balance 25 per cent.
In light of the government’s apprehension, the RVNL has been asking for a 69 per cent stake in the JV.
The Russian company has rejected its partner’s claim to become majority stakeholder in the joint venture and has also, as a result, not deposited the mandatory performance bank guarantee of Rs 200 crore required for the project to get started.
After receiving the letter of award, the bidder gets 45 days to deposit performance bank guarantee.
A senior government official, who is aware of the situation, stated that Railway Board officials met with RVNL and TMH earlier this month to discuss the matter. However, talks between all parties have since broken down.
To further complicate the matter, the Russian firm is now looking to add a new safeguard clause before signing any new contract with the Indian Railways. The clause will protect the contract from being cancelled by Indian Railways due to delays in execution.