The Financial Express
New Delhi: In what could spell fresh trouble for the commercial vehicle industry caught in a slump, Tata Motors and Ashok Leyland could lose orders for about 600 low-floor buses to be purchased by the Delhi Transport Corporation (DTC) to Chinese, Polish and Swedish manufacturers.
Ramakant Goswami, transport minister for Delhi, told FE: “The price and maintenance costs quoted by Tata were unrealistic; so, we have asked a few foreign companies to run buses, on a trial basis, on Delhi roads.” Goswami said foreign manufacturers were willing to sell the buses cheaper, though he did not spell out the price difference. Safety and quality issues with the current fleet also prompted the government to invite foreign manufacturers for the bus tender. The DTC had acquired the current fleet in the run-up to the Commonwealth Games in 2010.
A DTC spokesperson said Tata Motors, which had quoted R51 lakh per bus in 2009, is now asking for R76 lakh, or 50% more. Maintenance costs too have soared from the initial R3/km to R75/km.
“The higher price quoted by Tata Motors is because the engines need to be more powerful than they were earlier,” the spokesperson added.
The 600-bus lot will be the first part of a 1,725-unit order under the JNNURM scheme this year.
The latest tender was cancelled and fresh bids invited, since the only bidder in the first round was Tata Motors, which quoted high prices. A foreign player agreeing to sell buses cheaper, at lower maintenance costs and with a promise of better quality, could win the tender.
A Tata Motors spokesperson said the company was working with the government to finalise bus specifications for city conditions including additional power requirements. “In spite of DTC floating a global tender, Tata Motors was the only manufacturer to respond. Tata Motors’ competitive position also comes from its more than five years of experience in Delhi in maintaining their bus fleet of over 2,500 buses, ensuring on-road fleet availability of more than 95%. Tata Motors has not yet been officially informed on cancellation of the tender. The prices quoted were in line with the additional conditions of the tender,” the spokesperson said.
He added: “With respect to foreign competition, Tata Motors’ product plans were made taking into account that there will be competition, and their entry was expected. We have introduced products with world-class platforms and new variants have been added, which place us well with the competition.”
Losing the DTC order could be a big blow for Tata Motors and Ashok Leyland since they had been banking on the extension of the bus-buying scheme to drive volumes. Analysts say that if Delhi – which runs out of every four JNNURM buses in the country – opts for overseas manufacturers, other cities could follow suit.
Sales of medium & heavy commercial vehicles (M&HCV) for the first quarter (April-June) of this fiscal are down 15.5% at 55,945 units. This year’s slump comes on a low base of last year – in FY13, M&HCV volumes had dipped 23% at 2.68 lakh units.
Between 2009 and 2012, the purchase of 15,000 buses had been sanctioned under the JNNURM scheme across 60 cities, with the bulk of orders going to Tata and Ashok Leyland. Of this, DTC has purchased 3,750 buses. For FY14, the JNNURM scheme has been extended with an allocation of Rs 14,883 crore (from Rs 7,383 crore in FY13), of which Rs 4,900 crore has been earmarked for buying 10,000 buses.