On the Right Track

Today, Indian Railways ranks among the top five national railway systems in
the world in terms of size and scale and is poised to emerge as a world-class
railway system. It is a multi-gauge, multi-traction system covering over 60,000
route kms, with 300 railway yards and 700 repair shops, and covers most of the
countrys vast geographical spread. The rolling stock fleet of the Indian
Railways comprises 7,566 locomotives, 37,840 coaches, and 222 mn freight wagons.

With a workforce of around 1.4 mn, it runs more than 11,000 trains daily. In
order to make improvements in operational efficiency, bring transparency in
working and provide better services to customers, the Indian Railway is trying
to bring about radical changes in the railway technology systems and processes.
Procurement functions in Indian Railways form major part of the materials
management activity, and the functions are effectively discharged by adopting
established procedures, policy guidelines and practices. Annual purchases by
Indian Railways amounts to about Rs 18,000 crore, with 2 lakh purchases settled
in a year through tenders.

As a part of the overall reform process and to increase transparency in its
dealings, Indian Railways decided to adopt and implement e-procurement systems,
with Northern Railways (NR) taking the lead. Northern Railways successfully
started using e-procurement from May 2005, and presently covers all types of
tenders issued by Stores Department. Till date more than 3,000 e-tenders have
been uploaded, 1,500 tenders opened electronically, and another 800 e-tenders
have been decided through e-procurement in Northern Railway. Presently, around
3,287 suppliers are registered with Northern Railway.

The Scenario Now

From July 2008, the existing application software (stores tendering module)
developed by HCL and running successfully at NR in ASP mode, has been extended
for use by other railway departments and production units on a centralized data
center, by suitably customizing it through HCL. A single portal,
www.ireps.gov.in has been developed for the tendering process for all Indian
Railways units, and there is a single login registration for vendors. It is
planned that enhanced features will be developed in the application software for
global tendering, reverse auction for procurement of stores, and auction for
sale of scrap unserviceable stores.

The application software will also be upgraded suitably to include other
utilities like two packet tendering system, inspection call screen interface,
inspection report, material dispatch information, fetching of receipt note data
from MMIS server in purchase office to SPS, contract data transfer module from
MMIS to EPS, post contract amendment interface, search options, global
tendering, and auction/reverse auction. An integrated payment gateway for tender
cost and earnest money, security deposit will be created and payment module will
be linked with stores accounts module of MMIS for payment through ECS/EFT
against suppliers bill.

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The e-procurement application system has been designed to facilitate
online participation in the procurement process by buyers and suppliers using a
common platform and to bring in transparency and access to information. The EGP
application has been integrated with latest digital security features to
demonstrate and ensure highest level of security, confidentiality and trust
between the buyer and the seller. It allows vendors to search, view and download
tenders directly from the Indian Railways website and submit commercial and
technical offers online directly using standard input screens in an online
manner, by validating themselves with their login ID and password.

All tender notices are published on Indian Railways website from where
tender documents can be downloaded by the vendors directly. The tenderers can
see the tabulation statement of all offers after opening of advertised tenders
and also the status of their tenders. The security money is deposited
electronically through a payment gateway. The information regarding purchase
order and other purchase activities like renewal of registration, post contract
correspondence, etc, is conveyed to the concerned vendors through email.

Fortifying Security

Digital security features provided under the Indian IT Act 2000 secure the
e-procurement system. No vendor can interact with the e-procurement portal of NR
unless they possess a legally valid digital certificate from a licensed
certifying authority. For the convenience of the vendors, software developer for
the Northern Railways has tied up with Safescrypt for issue of digital
certificate. Use of digital signatures for e-transactions, public key
infrastructure for data encryption/decryption, time stamp by certifying agency,
128 bit SSL (secured socket layer) for secured data transmission has ensured
enhanced level of trust for authentication that only Railways authorized person
can decrypt, and open e-tender box.

To provide improved transparency to vendors, the application automatically
creates total rates for each item with messages directing vendors to fill and
submit commercial offers. Before bid submission, the total all inclusive unit
rates appear in numeric form and a vendor can modify any rate or all before
submitting the bid. Each bid document is digitally signed, time stamped,
notarized, and an HTML receipt message is sent to the vendor as acknowledgement
to submission of online offer with date and time for keeping records. Vendors
are not permitted to submit electronic bids after stipulated date and time of
tender opening.

To ensure confidentiality of rates and security, the commercial page,
containing the rate values, as quoted and submitted under commercial rate page,
is transmitted and stored in secured time locked database. It is fully secured
and encrypted form using Public Key Infrastructure before transmission on
Internet channels and remains encrypted till tender opening date/time, using
highest levels of data security standards as provided and approved by the
Certification Authority. All offers submitted online are stored directly into
the time locked electronic tender box which can be opened only after the date
and time as stipulated for tender opening by two authorized railway officials
who are provided valid digital permissions through digital certificates.

The Roadblocks

Started off as a pilot project, e-procurement in Northern Railway has been
successful in bringing transparency and efficiency in procurement operations. It
has been further extended to other zonal railways and five production units.
Reverse auction and engineering stores tendering module, and works tender module
developed by HCL has not been rolled out in Northern Railways yet, but will be
implemented in the next phase. It will be a major challenge when these modules
are operationalized, due to the complex nature of works tenders.

Adding an e to procurement introduces a layer of complexity by transferring
all interactions, rules and procedures into the virtual world. On the Internet,
the provision of trust becomes the keystone of any successful model.

The application used by the Northern Railways incorporates all security
measures but risks of a breakdown or security breach always exist. Utmost care
should be taken to ensure confidentiality of quoted rates and tender details to
inspire confidence in the suppliers to use the system, and to address the lower
level of trust in electronic procurement.

A major issue that needs to be addressed here is imparting training to
railway staff and vendors, to educate them with the application software for
smooth functioning of the system and overcome the inertia to work with latest
technologies. This poses a bigger challenge of universal Internet accessibility
and IT literacy. E-tendering is often condemned for discriminating against small
vendors who are not comfortable with the use of IT or devoid of high speed
Internet access. There should be an effective inbuilt grievance redressal system
for any problems encountered in the use of the software. A disaster recovery
mechanism is also in place as a backup for all the databases and electronic
records, as such systems are always vulnerable to virus attacks.

As this is just the beginning of the application, it will pose many more
challenges and opportunities to redesign the system. It is a crucial initiative
in increasing transparency and saving time and costs. In more than 150 years of
its existence, the Indian Railways has successfully adapted to the changing
needs of travel and transport and absorbed the advancements in technology to
successfully met the requirement of moving large volumes of freight and
passenger traffic.

IR was the pioneer in developing a dedicated skeletal communication network,
as a basic requirement for its reservation system and other applications.
E-procurement in the Indian Railways reflects its earnestness and dynamism of to
keep pace with the latest technologies and reap the benefits that e-business
generates.

Amit Kumar Jain

The author is IFS, deputy chief operation manager, Construction, NDWCS,
Northern Railways

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