India to award first rail supply contract to local firms - sources

By Neha Dasgupta

NEW DELHI (Reuters) - India is set to award its first global rail supplies tender to local firms, shunning major foreign bids, as part of its efforts to develop domestic manufacturing, two sources with direct knowledge of the matter said.

Prime Minister Narendra Modi is under pressure to promote Indian industry to create jobs for millions of people ahead of the South Asian country's next general election in 2019.

State-owned Steel Authority of India Ltd (SAIL), which had not even submitted a bid, will provide 80 percent of the 487,000 tonnes of rails sought in the Indian Railways tender, the sources told Reuters.

Jindal Steel and Power will supply the remainder, they added.

The global tender, with a clause to award 20 percent of the volume to a local firm other than SAIL, was issued in October 2017 and was meant to end SAIL's monopoly, which has repeatedly struggled to meet railways' rising demand.

In fact, Indian Railways was forced to issue a tender in the last fiscal year, as the state-run firm had failed to supply the targeted quantity of rails.

SAIL, JSPL and Indian Railways did not immediately respond to emails seeking comment. The two companies will be informed about the decision sometime next week, the sources said.

"Everything will be procured from here. The outsiders did not qualify," a senior government official told Reuters on condition of anonymity as the decision is not public yet.

Japanese trader Sumitomo Corp and East Metals AG, a unit of Russian steel and coal producer Evraz were among eight bidders competing in the tender.

Both officials said the decision was made to promote Modi's 'Make in India' manufacturing push.

Late last year, Modi's office had asked all government departments to prioritise the use of local products in state projects, after domestic companies objected to a global tender by the railways ministry.

"The railways have opened the tender and found JSPL's technical bid perfectly valid, so as per the government of India norm of 'Make in India', 20 percent volumes will be awarded to JSPL," said one of the sources.

(Reporting by Neha Dasgupta; Editing by Nidhi Verma and Alexander Smith)