Railways plans tie-up with IOC to cut on expenses

The railways will soon be reaching an understanding with Indian Oil Corporation (IOC) for refining crude oil imported by the transport behemoth itself — a move that is likely to save Rs 2,000-2,500 crore a year on taxes for the ailing transporter.

The railways consumes about 2.8 billion litres of diesel in a year, costing Rs 18,000 crore, and 17.5 billion units of electricity, costing Rs 12,300 crore.

“As an initial step, we have invited bids from consultants to work on the plan. We have received three bids. We are planning to import 500,000 tonnes of crude oil directly and will give it to IOC for refining. Our savings will be on account of taxes,” said Ravindra Gupta, chief administrative officer, Indian Railways Organization for Alternate Fuel (IROAF).

The three players that have submitted bids are PricewaterhouseCoppers, KPMG and Sahi Tejarat, an overseas agency.

Once the railways increases crude procurement, oil marketing companies are likely to loose a bulk customer.

It is the aim of Petroleum Minister Dharmendra Pradhan and Railway Minister Suresh Prabhu to transform the railways into a contract manufacturer, and a series of meetings have already been held in this regard, Gupta said.

“We have zeroed in on IOC's Vadodara unit to refine the imported crude,” he added.

As part of its strategy to move towards cleaner fuel, the railways has already installed rooftop solar panels in guard vans of six freight trains and is set to float tenders to get 200 such solar-powered guard vans.

In his 2015-16 budget speech, Prabhu had mentioned that the railways wanted to set up 1,000 megawatt (MW) of solar capacity on railway or private land and on the rooftops of railway buildings and trains. In addition, they also plan to put up around 200 MW of wind power plants by 2020.

Till date, the railways has set up solar and wind energy plants with total capacity of 50 MW.

Indian Oil Corporation