BackFirms operating containers look to join hands
Firms operating containers look to join hands
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Mumbai: Container operators, slammed by steep losses and a dramatic slowdown in trade, are now adopting an “if you can’t beat them, join them" approach.
In a case of what management pundits would call ‘co-opetition’, or working with the competition for efficient market sharing, surface transport firms such as ETA Engineering Pvt. Ltd, Boxtrans Logistics (India) Services Pvt. Ltd, Central Warehousing Corp. (CWC)), and Innovative B2B Logistics Solutions Pvt. Ltd are in talks to form a consortium, much like shipping firms do, to cut operating costs.
In a first-starter move, Innovative B2B tied up with CWC last year for sharing infrastructure and other services, and an executive at a container train operator, who did not want to be named, said collaboration has started among APL Ltd, ETA and Boxtrans.
ETA is also talking to DP World and APL, formerly known as American President Lines, the container transportation arm of Singapore-based transportation and logistics firm Neptune Orient Lines Ltd, for a formal tie-up.
“Yes, we are collaborating with other container train operators of the country in line with shipping lines (to) operate as a consortium," said K. Sathianathan, chief executive officer (CEO) of ETA Engineering.
ETA’s Freightstar Pvt. Ltd, the container train unit, runs six trains currently. “We are exploring sharing the slots with other container operators and we are talking to CWC and others for a possible collaboration. We are also open for associating with DP World," Sathianathan said.
Innovative B2B Logistics, the first private container train operator in the country, also pioneered collaborations through its strategic alliance with CWC, said Sankalp Shukla, CEO and managing director. “Now there are more players coming forward to forge alliances for optimizing cost and efficiency," he said.
Not everyone, however, is as taken with the idea. Arshiya Rail Infrastructure Ltd, a 100% subsidiary of publicly traded Arshiya International Ltd, commenced container train operations on 2 February and announced it would look for long-term contracts with large corporations rather than joining an alliance. The firm plans to introduce 30 trains by March 2010.
“We have different business model rather than joining any alliance," said Ajay S. Mittal, chairman and managing director of Arshiya International, adding that the firm is talking to at least 10 corporations for long term contracts of three-five years.
The idea of a consortium, though, is not new. Shipping companies have routinely formed them to pool vessels and share cargo slots to avoid duplication of services and to cut costs. State-owned Container Corp. of India Ltd, or Concor, is the leading container train operator and was the only company in the business until early 2007. Since then, after the government decided to unlock the monopoly, at least 15 operators have entered the business. But Concor continues to make a profit where others are in the red.
According to executives at at least three different firms in the business, the losses are on account of initiation costs, high haulage charges and exorbitant fees paid to use Concor’s infrastructure. All three spoke on condition of anonymity so they wouldn’t get on the wrong side of the government firm.
“All private container train operators are expected to witness a cash burn for at least next two years as the current slowdown will delay attaining minimum load factors required for break-even for another one year," said Syed Sagheer, analyst with research firm Infinity.com Financial Securities Ltd.
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