Going back on its earlier policy that mandated that the Railway Board screen and award work to eligible public sector undertakings (PSUs), the Ministry of Railways in an order said that PSUs, including those owned by Indian Railways, will now have to compete in the open market with their private counterparts.
The order issued on October 26 takes away a level of protection PSUs enjoyed under a policy formed in 2019 by former Railway Minister Piyush Goyal.
“All such work awarded under the existing scheme for which Letter of Award has not been issued or a Memorandum of Understanding signed or no major contractual obligation undertaken in any form, will also stand cancelled with immediate effect," the Ministry of Railways said in its order.
The order is expected to cut down on paybacks and bring in more competition and thus, lower Railways' costs, officials from the Railway Ministry said.
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.
The Indian Railways’ yearly capital spend has touched Rs 2,15,058 crore, of which over Rs 1 lakh crore was allocated in the General Budget.