DRAFT POLICY PAPERS

DRAFT POLICY
ON
SPECIAL FREIGHT TRAIN OPERATOR (SFTO)
1.0 GENERAL
The objective of the policy is to increase Railways share in transportation of non conventional
traffic in high capacity and special purpose wagons thereby increasing commodity base of Rail
traffic. This will facilitate induction of better design of wagons to increase through put per train.
This policy provides an opportunity to logistics service provider or manufacturers to invest in
wagon, use advantages of rail transport to tie up with the end users and market the train
services owned by them for rail transportation of selected commodity to create a win-win
situation for railways and themselves. The terms and conditions of the policy are indicated as
under:

2.0 DEFINITIONS AND ABBREVIATIONS

Definitions and Abbreviations of some of the terms used in this document are as under:
2.1 ‘IR’ means Indian Railways, Railway Administration.
2.2 ‘MOR’ means Ministry of Railways, Government of India.
2.3 ‘RDSO’ means Railway Design and Standards Organization.
2.4 ‘Special Purpose Wagon (SPW)’means wagons designed for rail transportation of a specific
commodity or group of commodities as approved by IR. These wagons include specialized
wagons for transportation of bulk commodities in loose like cement etc., specialized tank
wagons and wagons for carriage of automobile etc. Such wagons will not form a part of wagon
pool of IR.
2.5 ‘High Capacity Wagons (HCW)’ means ‘Special Purpose Wagons’ notified by IR, based on
various designs and carrying capacity of similar types, available with IR, which have increased
through put per train beyond 10%.
2.6 ‘Logistics Service’ means a business of providing one or more services of rail/road/sea/air
transport, warehousing, cold chain services, port terminal service, inland container depot, third
party or fourth party logistics.
2.7 ‘Identified commodity’ means commodities approved by MOR for transportation in special
purpose privately owned wagons. The list of commodity will be notified from time to time by
MOR.
2.8 ‘SFTO’ means Special Freight Train Operator and refers to the parties who invest in
procurement of rakes and arrange traffic for loading/unloading in the Special Freight
Trains(SFT), owned by them after obtaining necessary permission from the MOR under this
policy.
2.9 ‘SFT’ means Special Freight Train, a privately owned train for transportation of identified
commodities.
2.10 ‘End User’ means customer who is producer or consumer of the goods transported by rail.
2.11 Wagon Leasing Company (WLC): A Leasing Company engaged in the business of procuring
railway wagons and making them available to other business entities authorized to deploy such
wagons for operation over IR network in accordance with the extant policy of MOR.
2.12 Private Terminal: means a private siding or private freight terminal having facility to handle
commodities specified under this scheme.
3.0 ELIGIBILITY
(i) Applicant should be a registered company in India as per Company’s Act 1956
(ii) The company should have minimum 3 years experience in any one of the following fields.
(a) transport and logistics
(b) port and land terminal operations
(c) warehousing
(d) container train operators
(e) manufacturers
(f) wagon leasing company
(iii) The company should have a net worth of minimum Rs. 50 Crore as on 31 March of the last
financial year.
(iv) Any company which has been declared sick under Sick Industrial Companies (Special
Provision Act’1985) shall not be eligible to apply under these rules to operate trains either
individually or in association with other companies. In case the applicant is a subsidiary
company, experience and net worth of the holding company, owning more than 50% equity,
may be reckoned for the purpose of Para 3 (ii) and 3 (iii) above. However, in such cases, the
applicant company should have a minimum of 25% of the prescribed net worth.

4.0 MODE OF SELECTION:

4.1 For selecting SFTO, MOR will issue newspaper notification from time to time.
4.2 The interested applicants will have to apply for each category of commodities separately as
notified under para 10 as per procedure mentioned in para 4.5 below. An earnest money
equivalent to ___% of the reserve price for each category shall have to be paid by the applicant
along with bid documents. Applications submitted without earnest money will be summarily
rejected.
4.3 Earnest money of the unsuccessful bidders would be refunded within one month of the
completion of selection process. Earnest money of successful bidders will be converted into
security deposit, on completion of selection process and will be retained by railways. Earnest
money of the successful bidders would be refunded within one month of depositing the
registration fee otherwise the same would be forfeited and approval canceled.
4.4 To begin with for each category, maximum of five operators will be selected for registration
through the competitive bidding process at a time.
4.5 The operator has to apply for a minimum of 3 rakes in each category.
4.6 The selection of SFTO will be made after inviting competitive bids which will be in two parts
i.e. Technical bid and Financial bid.
4.6.1 Technical bid should contain all the details as outlined in item 3 of annexure-‘A’.
4.6.2 Financial bid shall contain the one time registration fee to be paid by the operator
subject to the minimum reserve price as mentioned in para 6.1 for each category
separately. Financial bids where registration fees quoted is less than reserve price will
not be considered.
4.7 The financial bid of only those applicants will be opened and evaluated who qualify under
the technical bid.
4.8 The criteria for selection of the operator will be on the basis of registration fee quoted in the
financial bid by the highest bidder provided the same is more than the reserve price. The
registration fee quoted by the highest bidder would become the bench mark and other
applicants selected under a particular category will become eligible for registration under this
policy provided they agree to pay the bench mark registration fee.
4.9 The committee after evaluating financial bid and finalizing the selection process and
approval of Board shall make a counter offer to 2nd, 3rd, 4th and 5th highest bidder to match the
bench mark registration fee in that category to be eligible for registration.
4.10 The bench mark registration fee fixed for each category shall be the reserve price for
subsequent selection process.

5.0 SELECTION COMMITTEE

The Selection Committee comprising of 4 Executive Directors one each from Commercial,
Traffic, Mechanical & Finance Directorates will finalize the selection and take approval of Board.

6.0 RESERVE PRICE

6.1 For selection of Special Freight Train Operator (SFTO) and fixing of the benchmark
registration fee, reserve price shall be Rs. ___ for category-I, Rs. ____ for category-II, Rs.
_______ for category-III, Rs. ________ for category-IV and Rs. ______ for category-V.

7.0 REGISTRATION FEE AND VALIDITY

7.1 The benchmark registration fee for each category will be fixed as determined through the
bidding process as mentioned in para 4.5 and 4.7 above.
7.2 The registration fee shall be deposited by successful bidders within one month of grant of
approval by MOR failing which the approval will be treated as cancelled and security deposit will
be forfeited.
7.3 Before induction of rake, train operator shall sign a concession agreement with Indian
Railway as per a format to be prescribed specifically by IR, which inter alia will contain details of
operating, commercial, accounting procedures and terms and conditions of the contract. No
movement of the rakes shall be permitted prior to the signing of this concession agreement.
7.4 The concession agreement for operation of SFT would be valid for a period of 20 years
extendable for a further period of 10 years or till codal life of the wagons, based on the
performance of the operator.
7.5 Granting of licence to an SFTO shall not restrict Indian Railways for transportation of such
traffic in wagon procured/arranged by IR under any other scheme or will not give any kind of
sole right to run such wagons exclusively but such wagons can be procured and run by other
operators also.

8.0 PROCEDURE FOR APPLICATION AND PROCUREMENT AND OPERATION OF TRAINS

8.1 General conditions and procedure for application and procurement of wagons is laid down
in Annexure A.
8.2 Procurement of wagons for induction under this policy will be allowed only with prior
administrative approval of MOR. Wagons procured with out the prior approval of MoR will not
be permitted to be inducted for operation under this scheme.
8.3 Wagons to be inducted in the system must be in compliance with applicable IRS designs and
specifications. Such wagons will be inducted after inspection by RDSO. Wagons other than IRS
designs can also be procured subject to its prior approval by MOR and after technical clearance
of RDSO as per extant rule.
8.4 Privately procured wagons will be inducted into service only after completion of the
mandatory safety and quality inspections by authorized agencies as notified by MOR.
8.5 In case of category 2, 3, 4, & 5 as defined in para 10, SFTO will operate between private
terminals equipped to handle SPW/HCW for which SFTO must have a tie up with such private
terminals or own its private terminal/sidings for handling of such trains. For category-1 as
defined in para 10, the traffic can also move from any rail terminal to any rail terminal on IR
provided suitable handling facility is available and subject to payment of terminal charges as
prescribed by IR.
8.6 General conditions for operation of such train are laid down in Annexure B.

9.0 MAINTENANCE OF WAGONS

9.1 Category –I : Maintenance of the wagons will be under taken by IR at its cost as is the case
with container flats.
9.2 Category – II to V : Maintenance of wagons may be undertaken by IR on payment of
specified charges as per agreement to be executed between IR and SFTO. However, private
maintenance of wagon may also be permitted as per extant policy of IR circulated from time to
time.
9.3 Suitable infrastructure for rake maintenance as prescribed by IR will have to be developed
by the SFTO within 2 years of commencement of operations at his cost if not already existing.
The rakes will be maintained on CC pattern.

10.0 COMMODITY
The commodities included under various categories are listed below:-
Category-1:
(a) Automobile
(b) RO-RO traffic
Category-2:
(c) Bulk Fertilizers
(d) Bulk Cement
(e) Fly Ash
Category-3:
(a) Bulk Chemicals
(b) Petrochemicals (excluding petroleum products like naphtha, aviation turbine fuel, high speed
diesel, kerosene oil, petrol, black oil, LPG)
(c) Bulk Alumina
Category-4:
(a) Steel products requiring specially designed wagons.
Category-5:
(a) Molasses
(b) Edible oil
(c) Caustic soda

11.0 FREIGHT PAYABLE, REBATE AND LICENSE FEE

11.1 Category-1
11.1.1 The commodity will be charged on haulage rate separately for loaded & empty
run as notified or fixed by the Railways from time to time.
11.1.2 The charging will be for minimum composition of wagons in a rake as notified for
container, by IR from time to time.
11.1.3 The charging will be for minimum composition of wagons in a rake, as notified by
IR from time to time.
11.2 Category - 2, 3, 4 & 5
11.2.1 Wagon inducted for transportation of commodities under category-2,3,4
&5should give at least the same net tonnage per train as carried in a train of full rake
length as notified by IR.
 11.2.2 For each loading of a rake, freight rebate of __% would be granted for a period of
20 years.
11.2.3 In case of high capacity wagons, if inducted by the operator, resulting in increase
in throughput per train beyond 10% an additional freight rebate of ____% shall be
granted on base freight for each increase of 10% in throughput per train subject to a
maximum of ____% rebate for the additional tonnage carried.
11.2.4 The above mentioned freight concession under para 11.2.2 & 11.2.3 will be
granted on the Base Freight rate.
11.2.5 The freight will be charged for minimum composition of train load as notified by
Indian Railways from time to time.
11.2.6 Apart from the freight charges, the concessionaire will have to pay license fee to
the Railways @ ____% on the base freight or Rs. ______ per annum per rake whichever
is higher in the loaded direction only, for the first 20 years of the concession. The rate of
license fee for the further period of 10 years or till codal life of the wagons would be
reviewed at the time of considering extension of the period of concession, subject to the
minimum rate as mentioned above. License fee should be paid at the time of
preparation of RR. Any shortfall in the license fee below Rs. _____ per rake per annum
will have to be made good by the operator the 30th April of the next financial year.
11.2.7 No freight will be charged for movement of empty rake to the next destination
provided the distance traveled by empty rake is less or equal to the distance traveled by
the train before unloading. However, if the distance traveled by the empty rake is more
than the loaded distance, then for additional distance traveled by the empty rake over
and above the loaded distance, empty freight rate shall be charged at 50% of the public
tariff applicable for the commodity on carrying capacity of the wagons.
11.2.8 All payments after signing of agreement shall be made through e-payment
including Freight and license fee etc.

12.0 AGREEMENT BETWEEN RAILWAY AND SFTO

After all approvals, concession agreement shall be signed between the SFTO and MOR as
prescribed.

13.0 NODAL OFFICER

ED/Freight Marketing, Ministry of Railways (Railway Board) would be the overall nodal officer
for the implementation of the policy. Contact details are – EDFM, Room No. 469, Ministry of
Railways, Rail Bhavan, New Delhi-110 001. Phone No. 011 23385222 (MTNL) and e-mail address
edfm@rb.railnet.gov.in.

At the Zonal Railways, Chief Freight Traffic Managers (CFTMs) shall be the single window nodal
officers.

14.0 LIEN
In cases of default of payment by the SFTO, IR may exercise lien on the privately owned wagons
and the consignment loaded in such wagons to recover its dues.

15.0 TERMINATION OF AGREEMENT

15.1 In case SFTO wants to terminate the agreement before the expiry of the agreement period,
he has an option to do so with three months advance notice. In such circumstance, he will also
have an option to sell his rakes to another SFTO provided the buyer has a valid registration to
run that commodity for which the rake has been inducted. However, in such case no refund of
registration fee, license fee or on residual value of the wagons will be admissible.
15.2 In case the SFTO does not follow the rules laid down by Railways for safety of the goods
carried or of railway property or any rules laid down by MOR for movement of SFT, the
permission of SFTO can be terminated by giving one months notice without any liability of
Indian Railways and he may also be liable to be penalized in accordance with the Indian Railways
Act’1989. In such case, registration and license fees shall not be refunded to the SFTO nor IR will
pay any residual value of the wagon.

16.0 DISPUTE RESOLUTION

16.1 In case of any dispute in interpretation of the policy, the decision of MOR will be final and
binding.
16.2 All disputes about implementation of the concession agreement, under this scheme,
between the Zonal Railway and the SFTO will be referred to a sole Arbitrator nominated by
General Manager of the Zonal Railway.
16.3 For resolving disputes on issues pertaining to claims for damages, freight charges, the SFTO
may seek redressal by resorting to the relevant provisions of the concession agreement, Railway
Claims Tribunal or Railway Rates Tribunal.
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Annexure-A
SPECIAL FREIGHT TRAINSCHEME (SFTS)
General conditions and procedure for application and procurement of wagons under SFTO are
as under.
1. The Railway Board shall notify in newspaper as well as in IR website, calling applications
from interested parties.
2. Earnest fee equivalent to ____% of the reserve price as mentioned under para 6 of
policy has to be deposited by the applicant alongwith the application.
3. The applicant shall furnish following details while submitting the technical bid at the
time of application:
(a) Name of the firm.
(b) Address of the firm.
(c) Category under which applied specifying the commodity(s).
(d) Number of rakes planned commodity wise.
(e) Type of wagon.
(f) Anticipated traffic volume with identification of possible circuits.
(g) Proposed Loading terminals & destination terminals.
(h) Details of experience and activities of the applicant.
(i) Document in support of registration under companies act 1956.
(j) Document in support of net worth of the company as on 31 st March of the last
financial year.
(k) Any other relevant information
4. MOR will grant necessary approval to the applicant as per the selection procedure
detailed in para 4.0 of the policy.
5. The registration fee shall be deposited by successful bidders within one month of grant
of approval by MOR failing which the approval will be treated as cancelled.
6. On the basis of approval of MOR, a concession agreement as prescribed by MOR will be
signed by Executive Director (Freight Marketing) and SFTO.
7. The applicant has to procure full rake composition as notified by IR with 4%
maintenance spares.
8. Customers will be required to incorporate following warranty clause in the purchase
contract with the wagon manufacturer:
“Supplies shall be 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
authorized to invoke this warranty clause in case of any default on the part of wagon
manufacturer.”
9. A SFTO can also take new wagons on lease from a wagon leasing company subject to
necessary approvals by MOR. SFTO can also purchase or take on lease wagons procured
under this scheme from another registered operator, under this scheme, in that
particular category, subject to necessary approval by MOR. However, in such cases SFTO
will be entitled for a freight concession, minus the age of the wagons as certified by the
concerned zonal railway.
10. The applicant shall inform the MOR regarding details of placement of procurement
order. Similarly the date of actual induction shall be advised by the applicant to MOR
under advice to concerned zonal railway(s) indicating the loading and unloading
terminals.
 11. On receipt of documents about the induction of rake, a notification shall be issued by
MOR including all details of concession, the date of commencement of concession
period, the name of SFTO, wagon number, category, handling terminals etc.
12. In case of the already approved design of wagons, the SFTO should procure the rake and
start operation under this scheme within two year from the date of signing of the
Agreement. In case of failure to adhere to this time schedule, unless specific prior
extension is given by the Railway Board, the registration fees shall be forfeited and
approval canceled.
13. In case of new design wagons the applicant while submitting registration fee shall give
details of type and design of wagon, wagon specifications etc. The same shall be
evaluated by MOR in consultation with RDSO and if technically it is found to be feasible
to operate such new design wagons the registration fee shall be retained other wise 99%
shall be refunded and registration under the scheme will be canceled. However, such
wagons should be inducted in IR system within four years from the date of registration
under the scheme unless specific extension is given by MOR otherwise the registration
fee would be forfeited and approval canceled.
14. The loading and unloading zonal railway shall maintain all records pertaining to details of
loading/unloading, circuits on which service is being run, changes in circuits over a
period of time, concession granted, freight charged, lead in empty and loaded direction
separately, commodity and category. The zonal railway shall also be responsible for
operation of the agreement.
15. If the SFTO intends to induct additional rakes in the same category for which the
registration fee has been paid, the same may be permitted by Railways subject to
payment of license fee as elaborated under para 11.2.6. Conversely if he wants to
withdraw any number of rakes he will be permitted to do so without any refund of
registration fee.
16. Similarly, in case the operator wants any addition or deletion in the loading/unloading
terminals or circuits, the same may be permitted on the basis of application submitted
to MOR based on operational feasibility. Such approval may be given only once in a year.
*****
Annexure-B
SPECIAL FREIGHT TRAIN SCHEME (SFTS)
SFT shall be operated as per the conditions prescribed below:
1. Trains purchased under SFT scheme will not be merged in the wagon pool of IR. Rakes
comprising of such wagons will be identified as exclusively belonging to the SFTO who has
procured them. Since the rebate will be applicable on the specific rakes for a specific period,
each rake will have separate identification with date of commercial commissioning.
2. The SFTO will have a tie up with the end-users for marketing and arranging traffic. As far as
the Indian Railway’s liability is concerned, the SFTO will be the Consignor and Consignee for the
consignment for which Railway Receipts will be issued by railway commercial staff posted at the
terminal.
3. The SFTO will develop his own terminal or tie up with private sidings/terminals as per extant
rule for loading/unloading of traffic moved in SFT. In case of tie up with other private terminals,
the SFTO shall submit a copy of agreement to this effect with the private terminal operator for
such movement to the concerned Zonal Railways.
4. Indents for loading in such trains will be placed at the nominated loading point/terminals for
the nominated destination point.
5. The rakes may be used by IR for traffic offered by customers other than the SFTO subject to a
prior mutual written agreement between IR and such SFTO.
6. The SFTO may carry only the identified commodities in the train subject to conditions
specified in the goods tariff, red tariff, and under the provisions of the Act and any other
instructions issued on the subject, by Ministry of Railways or IR from time to time.
7. Freight Operation Information System (FOIS) of Indian Railways shall also cater to the
requirements of the operator for an integrated management and operations information service
and the operator shall provide all relevant data as required by FOIS and shall be given ‘read
only’ access to this system on payment of reasonable cost.
8. The operator shall charge his customers for rail haulage, terminal handling, ground rent on a
market determined basis and railways shall not exercise any control over such pricing.
9. There shall be no demurrage charges by the Railway, but the Railway shall levy stabling
charges as per the rates notified from time to time in case rolling stock belonging to the
operator is stabled on IR network.
10. The rail operator shall be a common carrier as defined under the Indian Railway Act.
11. Normal rules in respect of claims shall be applicable according to the Indian Railway Act.
*****