$15-B Indian Railways safety overhaul at risk due to rail shortage

NEW DELHI (Reuters) – A planned $15-billion safety overhaul of India's ageing rail network is facing delays as the country's state steel company is unable to meet demand for new rails, according to two government documents seen by Reuters.

State-owned Steel Authority of India Ltd. (SAIL) has promised to meet only around 78 percent of demand in the year to end-March 2018, prompting Indian Railways to escalate the problem to the office of Prime Minister Narendra Modi, communications between the railways and the steel ministry show.

The shortfall means upgrades of the accident-prone network could move at a slower pace than the five years initially planned, and underscores the problems facing Modi as he tries to modernize India's infrastructure. Supplies of rails are only expected to improve next year.

"(The) ambitious program of capacity augmentation undertaken by railways and track renewal, the foremost priority in the recently created (railway safety fund)... crucially hinges on the supply of rail," Railways Board Chairman A.K. Mital wrote in a letter to Steel Secretary Aruna Sharma on May 19.

"Unless SAIL steps up supply, the whole program will be at risk."

The state rail operator is in the middle of a $130 billion, five-year overhaul to modernize the world's fourth-biggest network.

The government in February launched an additional $15-billion fund to tackle a 25 percent rise in train accidents due to track defects over the past two years.

Loss-making SAIL, whose revival is being managed by the steel ministry, supplied about 620,000 tons of rails in the fiscal year to end-March, well short of demand of 1 million tons. In a meeting called by Modi's office on Feb. 14, SAIL told the railways that supplies would fall well short of demand this fiscal year too, according to the letter.

For 2017/18, it has committed to provide 1.14 million tons, against a request for 1.46 million tons as demand ramps up to meet the safety program.

This represents about 78 percent, but the rate of supplies for the first two months suggested SAIL would struggle to meet even its own reduced target, Mital said in the letter.

"The shortfall needs to be made good quickly and supply rate accelerated to meet the committed quantity (for this fiscal year)," Mital wrote.

SAIL and Modi's office did not respond to requests seeking comment. The railways had no immediate comment and Mital did not respond to a request for comment.