The cost of moving a cargo container every kilometre from Tughlaqabad in Delhi to Jawaharlal Nehru Port (JN Port)—India’s biggest container port, located in Navi Mumbai—is 50% higher than what it costs to move a container over every kilometre in the US. Sometimes, the inland rail haulage charges for containers are more expensive than ocean freight, say, for taking the cargo from JN Port to Europe.
This is largely because there was only one player in this business till early 2007, the state-run Container Corp. of India Ltd, or Concor. The rates were also high due to a shortage of wagons to haul these containers.
India privatized container rail freight services in 2007 through a policy that effectively ended Concor’s monopoly. Since then, the government has given rights to operate container trains on various routes to 13 private operators and three state-owned firms—Concor, CWC Ltd and Krishak Bharati Co-operative Ltd.
Since starting operations in May last year, the new private and state-owned operators have introduced 50 more rakes—each rake comprising 90 twenty-foot equivalent units, or TEUs, the standard size of a container—in addition to the roughly 200 rakes that Concor owns. Another 50 rakes are being built at wagon-building factories in the country.
Yet, two things have not happened. Neither have the rates come down, nor has Concor’s stranglehold over this business loosened.
On the contrary, the rates will rise by a further 13-14% from 1 August after the railway ministry revised the haulage charges it collects from container train operators for using its signalling, telecommunications and staff for running their trains.
The haulage charges set by the railway ministry become the base rate for operators, on which they add their own capital and operating costs to work out the rates they charge their customers.
The cost of transporting a standard cargo container from Tughlaqabad to JN Port currently varies from Rs16,450 to Rs27,600, depending on four weight slabs, of up to 12 tonnes, 12-20 tonnes, 20-27 tonnes, and above 27 tonnes.
Even after losing its monopoly in running container trains, Concor continues to call the shots. New operators had no choice but to take its help in using its rail-linked inland container depots, or ICDs, located at Dadri and Tughlaqabad, where cargo is aggregated and stuffed into containers and transported to ports for shipment to final destinations.
Four new operators signed an agreement with Concor to use its Dadri and Tughlaqabad depots because of the strategic location of these facilities. The other operators went to the rail-linked ICD facility at Loni in the Ghaziabad district of Uttar Pradesh, owned by CWC and managed by a private firm.
Adani Logistics Ltd, one of the new operators, has set up its own ICD at Patli in Haryana, while Gateway Rail Freight Ltd, another new operator, has a depot at Garhi Harsaru at Gurgaon near Delhi.
Concor extracted its pound of flesh from those who decided to take its help. Operators using Concor’s facility have to pay 40% of their margins from each trip to the state-owned firm.
These firms also had to agree with Concor to fix rates on a par with those charged by the state-run firm that is also the market leader. And, they could not switch over to a private ICD after signing up with Concor. In case they set up their own ICD, Concor has the right to use such new facilities on the same terms.
Building a new ICD has become an uphill task for new operators as land prices have soared. An acre of land in the National Capital Region costs about Rs2 crore. It requires a minimum of 50 acres to set up an ICD. Another Rs100 crore will have to be spent on erecting buildings, laying railway lines and installing equipment.
Setting up rail-linked ICDs, a key aspect of container train operations, has thus become a bit of a problem for the new operators. So, Concor continues to hold sway over rail haulage of containers, and inland haulage costs continue to be high in India, making exports and imports costlier and uncompetitive.
The only gain so far from the privatization of container train services is that it has helped railways wean a few extra containers from its traditional rival, roadways. Earlier, 80% of the container cargo moved by road and 20% by rail. This has gone up to 30% by rail, and the rest by road.
With no difference in rates, new operators are attracting customers with better service offerings such as fixed schedules of departure and arrival of trains at originating and departure points and reduced transit time.
P. Manoj is Mint’s resident shipping expert and writes on issues related to shipping and logistics every other Friday.
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