By Neha Dasgupta and Tommy Wilkes
NEW DELHI (Reuters) - A clause in India's global tender for steel rails, part of a $130 billion overhaul of its railways, could help Jindal Steel and Power Ltd win up to 20 percent of the work, sources said.
The world's fourth-largest rail system is undergoing a five-year overhaul to replace ageing tracks, improve efficiency and end a spate of deadly train accidents, including one on Friday.
State-run Steel Authority of India Ltd (SAIL) has struggled to supply the steel, however, and is expected to deliver 920,000 tonnes of it this financial year, just 65 percent of its target.
In response, the Ministry of Railways last month opened up a global tender for 717,000 tonnes of steel rail worth an estimated 30 billion rupees ($464 million) to private bidders for the first time.
Global steelmakers such as ArcelorMittal and Thyssenkrupp could bid, as could Jindal Steel and Power, India's only private producer of the steel.
India's steel ministry has objected to the tender, pointing out that preference should be given to local suppliers in support of Prime Minister Narendra Modi's drive to boost manufacturing.
Indian Railways officials have also expressed concern that JSPL lacks experience building rails, three people with knowledge of the conversations told Reuters this month.
A senior Railways official said any decision for the tender would depend on competitive bidding, which opens next month.
However, Indian Railways is considering using a clause in the Oct. 18 tender that allows for a "developmental" or a trial order of up to 20 percent of the steel to be awarded to a domestic manufacturer, four officials with direct knowledge of the proposal said.
It can award that work even if the bidder "does not have proven performance of supply of rails", according to the tender.
JSPL, which says it has supplied 150,000 tonnes of rail to Iran since 2016, did not respond to a request for immediate comment.
The railways ministry is likely to make a decision within two weeks and is keen to award work to JSPL in light of the government's policy on local producers, two officials with knowledge of the discussions told Reuters.
The ministry did not respond to a request for immediate comment.
($1 = 64.7100 Indian rupees)
(Editing by Jason Neely)