The Railway Board has issued an order that will now make public sector companies, including those under the national transporter, compete with the private sector in the open market for rail contracts.
The order on Tuesday, in effect, takes away a level of protection the PSUs enjoyed under a policy formed in 2019 which gave them dibs at juicy rail contracts.
Sources indicate that the decision taken by Railway Minister Ashwini Kumar aims to cut down on paybacks, bring in more competition and thus lower the Railways' cost.
"The policy approved by the Board, in their meeting held on 19.12.2019 to introduce competition amongst the PSUs for awarding Railway works, hereby stands withdrawn with immediate effect," the order stated.
Under the earlier policy introduced in 2019, the Railways identified eligible PSUs and awarded the contract after a competition within them. The winning PSU would then float tenders for contractors for the works.
The Tuesday order said, "To further enhance benefit from competitive bidding, it has now been proposed to withdraw the policy for competition among eligible PSUs for allotment of work by Railway Board and the same shall now on be done through open tendering with immediate effect."
"Also, all such works awarded to PSUs under existing scheme for which LOA (letter of award) has not been issued or MoU signed or no major contractual obligation undertaken in any form, will also stand cancelled with immediate effect," it stated.
Under the new policy, the zonal railways will float tenders in the market and the contract would be awarded to whosoever wins the bid -- a PSU or any other company.
"This in effect cuts out a layer in the process which will save both time and money. It also will weed out corruption and even monopoly of certain groups," an official said.
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