Can Tata Steel make Vande Bharat's wheels? MD says a business case is a must

Indian Railways is planning to introduce more Vande Bharat trainsets on intercity and overnight routes

Tata Steel's Managing Director and CEO TV Narendran, in an interaction with Moneycontrol on November 13 said that the steel industry in India, including his firm, remains capable of manufacturing products with strategic or national security-related importance, such as railway wheelsets.

However, with just one major customer- the Union government -- any change in their plans may put the viability for making such products in doubt, he said.

The Vande Bharat demand

Continuous supply of railway wheels has become crucial for the Indian Railways, which is planning to expand the network of its flagship Vande Bharat Express service on both daytime intercity and overnight routes.

It also plans to increase production of coaches, engines, and trainsets for both passenger and freight utilisation.

However, domestic production remains at the lower end, around 75,000 per year, at Indian Railways facilities like Yelahanka in Bengaluru, and PSUs like the Steel Authority of India Ltd (SAIL). The Indian Railways have projected demand for wheels to reach around 2,00,000 by 2026, as it ramps up production across all rolling stock categories.

Where are wheels coming from now?

Since domestic prodution is low, the railways largely depend on imports from China. Earlier, Ukraine, which has a large rail manufacturing industry, was a significant supplier of wheels, particularly for Vande Bharat trains, until the Russian invasion of Ukraine forced the Railways to look elsewhere for supply.

The need for a business case

"Often we confuse what we are not making with what we can't make. See, technically, pretty much all the steels India needs, we can make. The question is: is there a business case for it? Even railway wheels we had looked at. The problem with railway wheels is you have only one customer. So, if you make a big investment and the customer makes some changes in their plans, what do you do with that investment?" Narendran remarked. He added that one of the company's plants in the UK was known for manufacturing railway gear, and was set up with significant investments. However, Tata Steel ended up making a loss at that plant.

"Often it's the economic viability which is limiting us rather than the technical ability. The toughest steel to make are the ones for packaging, automotive, outer panel, and for oil and gas applications. In India, Tata Steel makes these and some of our peers also make all these steels," said Narendran. He also noted that the company makes steel for the transfer of hydrogen, and Tata Steel has a significant market share in automotive steel.

Can PLI scheme help?

Should the government step in with incentives to manufacture such strategic products? Narendran said that while production-linked incentives (PLIs) can help, the incentive amount itself may not be enough to push investment in such steels. Help from the government, he added, can also come through innovation measures.

"The PLI scheme is a good way. Of course, we are also part of the PLI scheme, but it's not that the PLI amount is material enough to drive an investment decision by itself ....wherever there is a long-term strategic need, I think the government, to be fair is working with us. For instance, we have also applied to the government for some support on some of the research and development-related work we're doing," he said.

Domestic industry participation

Some domestic firms, such as Ramkrishna Forgings, Titagarh Rail Systems (erstwhile Titagarh Wagons), and Bharat Forge, have expressed interest in manufacturing railway wheels. Ramkrishna and Titagarh have formed a joint venture to make railway wheels at a new plant near Chennai, with an investment of Rs 2,180 crore. The railways will buy wheels from the Ramkrishna-Titagarh joint venture over a 20 year-period, starting with 80,000 wheels per annum.

The plant is expected to have a forging capacity of 2,28,000 wheels per annum, and the first phase is expected to go on stream from FY27, according to a report from India Ratings and Research.