State-run SAIL on Tuesday signed an agreement with RITES, a subsidiary of the Indian Railways, for jointly setting up a railway wagon-making unit in Kulti, in West Bengal, at a proposed investment of Rs 120 crore.

“The joint venture (JV) between the two PSUs is mutually beneficial. It will lead to many more such collaborations between them,” Steel Minister Virbhadra Singh told reporters in New Delhi after the signing ceremony.

Steel Secretary P K Mishra, Railway Board Chairman Sanjeev Handa and RITES Managing Director V K Aggarwal were among the senior officials present on the occasion.

The Steel Minister said there are plans to form five such JVs for wagon manufacturing and the SAIL-RITES collaboration is the first in line.

The wagon manufacturing unit, which is likely to start operations in next 14 months, would have an annual production capacity of 1,200 wagons.

“This is a red-letter day in the history of SAIL, as every year, there is a shortfall of 6,000 wagons. This fifty- fifty JV will help to bridge the gap,” SAIL Chairman C S Verma said.

For the project, SAIL will provide its surplus land in Kulti, near Burnpur, in West Bengal. The location of the plant would be near the Chittaranjan Locomotive Works.

SAIL, which has an annual production capacity of about 14 million tonnes, will also supply its specialised steel products to the proposed wagon-making unit.

Railway Minister Mamata Banerjee had said earlier that the tentative name of the factory would be the Bengal Wagon Industry.

The present wagon demand in the country is around 25,000 units and it is expected to rise further once dedicated freight corridors start coming up.