Malaysia Seeks Extension Of Lease For Locomotives

Malaysia has sought a two-year extension on the lease period for the 39 metre-gauge diesel locomotives it imported from India during the course of the last three years. The request of the Malaysian authorities comes in the wake of the currency turmoil in the region.

The diesel locomotives of the YDM category (metre-gauge locomotives used for hauling both passenger and goods traffic) were rendered surplus after gauge conversions in the Southern and the South-Central railway zones and were exported after reconditioning at the Golden Rock diesel workshop at Trichirapalli in Tamil Nadu.

The entire lease was for a five-year period and the rental income realisation to the railways was of the order of Rs 25 lakh per month on every locomotive. The annual inflow on this count was in the region of about Rs 120 crore. The terms set included maintenance during the lease period. The arrangement was worked through the Indian Railway Construction (IRCON).

 

Official sources said that part of the residual payment was due to have been made this year. However, Malayasia wanted the payments extended by another two years on account of the currency crisis facing the country and the slowdown in foreign currency earnings.

Besides, the steep depreciation of the ringgit against the dollar has made servicing of debt payments difficult for the railways.

While the valuation of the locomotives was made in rupees, the payments were made in dollar equivalent payments.

At the time of entering into the deal, the estimated returns to the railways was at around 15.2 per cent, where was the dollar cost for Malaysia was estimated at about six per cent. However, with the depreciation of the ringgit by about 40 per cent, and the rupees decline by only about 15 per cent, Malaysian railways had found that the ringgit cost of the payments had escalated.

The sources said that the extension would not necessarily mean a revision in the terms but that the lease rental flow would continue for another two more years on the existing terms, increasing the revenue flows of the railways and the effective rate of return by another two per cent, they added.

The Indian Railways had, at the time of entering into the deal, chosen this leasing option as an alternative to scrapping such rolling stock with a residual life of another 25 years.

Consequently, the extension of the lease arrangement is not necessarily a loss for the Indian Railways, the sources said.

The officials said that IRCON was exploring markets in Thailand, Tanzania, Vietnam, and Brazil and Chile in South America, where similar gauges were still being used, for similar deals as more metre gauge diesel locomotives are due to become surplus after the completion of scheduled gauge conversion.