Wagon Investment Scheme (WIS)

1.0 OBJECTIVE : In order to encourage public-private partnership in procurement of wagons to meet with the anticipated incremental freight traffic in the coming years, Honble Minister for Railways, while presenting the Railway Budget 2005-06 on 26th February 2005, has announced introduction of a new scheme called Wagon Investment Scheme (WIS). Customers investing in Railway wagons will be assured of supply of a guaranteed number of rakes every month based on the number of rakes procured and the turn round of the type of wagons with 10% concession in freight. In addition, two bonus rakes per month will be supplied without freight concession or penalty. Investors opting for Engine on Load (EOL) Scheme will be get additional bonus supply of two BG rakes per month without concession in freight. This guaranteed supply will be in addition to normal supply of rakes to such customers. 2.0 2.1 ELIGIBILITY : Wagons under this scheme can be procured by: (i) (ii) (iii) 2.2 Individuals as producers; Corporate entity as producers; Association or group of companies, such as, integrated steel plants of SAIL or a group of cement companies in a cluster etc.

Customers who dont have their own siding can also participate under the scheme. In such cases, preference will be given to customers investing in wagons over other indenters at the time of supply of guaranteed number of rakes with concession in freight and bonus supply of rakes as is applicable to other investors. MODE OF PROCUREMENT : Directly by the owner from builders approved by Ministry of Railways, subject to current Indian Railways Standard (IRS) designs &

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specifications and inspection by nominated agency of Indian Railways namely RDSO. All critical components will be procured from RDSO approved sources and to current IRS specifications. OR Through Indian Railways. 3.2 Wagons can also be procured through wagon builder of foreign country subject to Indian Railways Standard designs and specifications and subject to inspection by nominated agency of Indian Railways.

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Foreign exchange o its equivalent, if any, for imported components r would be provided by customers participating in the WIS. GUARANTEE/ WARRANTY OF WAGONS : In case of direct procurement of wagons, customers will be required to incorporate a warranty clause in the purchase contract with the wagon manufacturer as under: Supplies shall be fully guaranteed against any manufacturing defect/poor workmanship quality etc. for a period of 24 months of commissioning or 30 months from the date of delivery, whichever is earlier. During this period contractor will arrange to repair/replace any defective part free of cost or replace complete set if required. Further, since these wagons are to be utilized by the customers of Indian Railways, they are hereby authorised to invoke this warranty clause in case of any default on the part of wagon manufacturer.

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PATTERN OF MOVEMENT : Wagons procured under the scheme will merge and operate in general pool of wagons of Indian Railways. EXTENT OF PRIVATE OWNERSHIP :

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Users can own any number of wagons in unit of rake loads without any ceiling, to the extent required by them, subject to a minimum of one rake and 4% additional wagons as maintenance spare. Procurement of wagons in piecemeal shall not be permitted. 6.0 CATEGORIES OF PROCUREMENT OF WAGONS : There will be two categories for procurement of wagons under the scheme : (i) Category I - BCN wagons

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Category II - BOXN wagons

BENEFITS ADMISSIBLE TO OWNERS : For investment made in every BG rake with maintenance spares, customers will be assured of supply of a guaranteed number of rakes every month as follows : Category I - BCN Wagons Freight rebate of 10% shall be granted for 15 years and guaranteed supply of wagons at the rate of 4 rakes per month. In addition, a guaranteed supply of two bonus rakes will be made without freight concession or penalty. Category II - BOXN Wagons Freight rebate of 10% shall be granted for 10 years and guaranteed supply of wagons at the rate of 6 rakes per month. In addition, a guaranteed supply of two bonus rakes will be made without freight concession or penalty. In addition to the above, a guaranteed supply of two bonus rakes will be made without freight concession or penalty to those opting for the Engine on Load Scheme (EOL).

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No lease charges shall be payable under WIS. Salient parameters are summarized as under:BCN rakes 10% 15 Years 4 rakes Per month BOXN rakes 10% 10 Years 6 rakes Per month

Freight rebate Period of rebate Guaranteed number of rakes with Freight rebate Bonus : Additional Guaranteed number of rakes without Freight rebate or penalty (A) Without EOL

2 rakes per month

2 rakes per month

(B) With EOL

4 rakes Per month

4 rakes Per month

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MAINTENANCE OF WAGONS : Investors in WIS will not be required to pay any maintenance charges for wagons. However, if the Investor owns a private siding, he will be governed by the relevant siding agreement in respect of infrastructure facilities including maintenance of wagons within siding premises. WAGONS INVOLVED IN ACCIDENTS : In the event of wagons getting condemned as a result of accident where responsibility is conclusively established that the accident occurred owing to acts of omission and commission on the part of owner of the wagons, the guaranteed clearance will be reduced proportionally. In all other cases, Indian Railways will continue to meet the commitment of guaranteed supply during the contract period. In the event of the such wagons getting condemned as a result of accident, Indian Railways will pay the depreciated value as per Income

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Tax Rules minus scrap value of the wagon at the time of condemnation. Condemned wagons can be disposed of by the Investor directly or through Railways. The commitment of guaranteed supply will cease for wagons so disposed off.

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FAILURE TO MAINTAIN/CONSUME GUARANTEED SUPPLY OF WAGONS : The guaranteed supply of wagons will be monitored on a monthly basis. In the event of the Investor being unable to use the guaranteed supply of wagons, the quantum of supply will be reduced proportionately for the number of days the wagons remained unutilized or stabled. The number of wagons idling will be those stabled in the owners siding to the extent the Investor has contributed the rakes/wagons. FREE TIME AND DEMURRAGE RULES : Free time and demurrage rules applicable to railway owned wagons will be applicable to wagons procured under WIS. In case wagons are detained on Investors account for loading/unloading for more than 50% of the normal prescribed free time over a month the guaranteed monthly supply of wagons will be reduced proportionately. (Example: If the guaranteed clearance for a plant is 4 BG rakes in a month and loading/unloading time in excess of 50% of the normal prescribed free time in a month is 120 hours then guaranteed supply for the next month will be reduced by 1 BG rake).

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TERMINATION OF AGREEMENT : In the event of termination of the arrangement by the Investor on account of liquidation/merger with other company or due to any alteration/deletion in the scheme, the ownership of wagons would remain with the Investor. However, the Investor shall have option to sell the wagons to Indian Railways at a mutually agreed price. CHANGES IN THE SCHEME :

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Terms of the scheme (WIS) may be altered by mutual consent of both parties. 14.0 NOTICES : All communications under WIS shall be in writing and any such notice shall become effective: a) Upon personal delivery thereof; b) On delivery by registered post; c) Upon proof that the communication was complete. Any change in the address shall be notified by registered post in order to make the same cognizable for purpose of this clause. 15.0 15.1 ARBITRATION : In the event of question, dispute or difference between the parties hereto relating to any matter arising out of or quoted with this agreement, such dispute or difference shall be referred for the award of three arbitrators. One arbitrator is to be nominated by the Investor, the other by the Railways and the third arbitrator to be nominated by mutual agreement between the parties and, in the event of non-agreement, the third arbitrator shall be appointed in accordance with the provisions of the Arbitration and Conciliation Act, 1996. In the event of arbitrator dying, neglecting or refusing to act, or resigning or being unable to act for any reason or his award being set aside by the court for any reason, it shall be lawful for the authority appointing the arbitrator to appoint another arbitrator in place of the outgoing arbitrator in the manner aforesaid. The arbitrator may from time to time with the consent of all the parties to the lease enlarge the time taken for making the award. Subject as aforesaid, the Arbitration and Conciliation Act 1996 and the rules there under and any statutory modifications or reenactment thereof, for the time being in force, shall apply to the arbitration proceedings under this clause.

The venue of arbitration shall be in India, at a place decided by the Arbitrators in consultation with the parties. In this clause the authority to appoint the arbitrator includes, if there be no such authority, the officer who is, for the time being discharging the functions of that authority, whether in addition to other functions or otherwise. *****