Given that railways’ annual purchases are over Rs 50,000 crore every year, the national transporter is trying to save by opting for reverse auction on an electronic platform. This means the process of bidding doesn’t end after receiving the quotes in one round. The technically qualified bidders are offered a chance to lower their bids than the lowest bid in the first round in a transparent process online.
The move, expected to improve competition and lower cartelisation, becomes important in the context of the Indian Railways planning a sharp increase in capacity over the next few years.
Items that can be within the purview of the platform include rail sleepers, tracks, signalling cables, and high speed diesel, locomotive spares. The Railways plans to have electronic reverse auction platform soon for implementing the policy across materials to be used for services and works of above Rs 50 crore each and supply tenders of over Rs 10 crore each.
HOW REVERSE AUCTION WORKS
This is how electronic reverse auction will work. “After a lowest bidder emerges in the first round of biddding, other bidders can see the lowest price on the online platform. In case any one of the bidders decide to lower its bid for offering materials, the lower price bid will be visible on the platform, although the name of the player won’t be visible,” explained an official. Participating players can use the online mechanism – which would be open for a certain number of days – to re-evaluate and submit bids.
The reverse auction software – developed by Railways’ inhouse IT arm CRIS — will be used as a platform. The process will also help identify specific areas where new vendors are required, while functioning within the parameters of Make in India policy and Micro, Small and Medium Enterprises policy.
This reverse auction process is expected to lower attempts of collusion. Instances of companies colluding to get a pie of the railway procurement are not very uncommon. In 2017, Competition Commission of India (CCI) imposed penalties of almost Rs 3 crore on three firms for bid-rigging of tenders floated by Indian Railways for procurement of a particular item — brushless DC fans — in 2013. “The firms had shared the market by way of allocation of tenders of Indian Railways for brushless DC fans amongst themselves under an arrangement and indulged in bid rigging and collusive bidding in contravention of the provisions,” according to CCI.