Bangalore: The already high cost of moving cargo by rail is set to increase by at least 10% after the railway ministry increased haulage charges for transporting containers, effective 1 August.
Private container train operators have decided to pass on the higher charges, varying between 15% and 20%, depending on weight slabs, to their customers. The quantum of increase is yet to be decided.
State-run Container Corp. of India Ltd, or Concor, India’s biggest carrier of cargo containers by rail, has decided to absorb part of the increase. “We will pass on not more than 10% of the higher haulage charges to exporters and importers,” said a Concor official responsible for pricing of services who didn’t want to be identified.
About 30% of India’s container cargo of 7 million TEUs a year is transported by rail, and the rest by road (Photo by: Rajeev Dabral/Mint)
“A proposal to this effect has been put up to the company management and a decision will be announced in the next few days,” he added. Concor is 63% owned by the Indian government.
“The hike announced by the railways ministry is quite steep,” said P.G. Thyagarajan, managing director of Sical Multimodal and Rail Transport Ltd, the container train operations unit of Sical Logistics Ltd. “I don’t think any operator other than Concor will be able to absorb the hike because our capital and operating costs are much more than Concor, which has been operating for many years.”
Haulage charges set by the railway ministry become the base rate for container train operators, who add their own capital and operating costs to arrive at the rates to be charged from exporters and importers. These operators pay haulage charges to the ministry for using the track, locomotives, signalling infrastructure and staff of the Indian Railways.
“Haulage charges are already high as far as private operators are concerned. It will be difficult for us to sustain with old tariffs,” said Yogendra Sharma, president of Adani Logistics Ltd, which runs container trains on the Delhi-Mundra sector and plans to add more routes shortly. “We will have to pass on the higher haulage charges to the trade.”
Container haulage is charged in terms of rupees per TEU, or 20ft equivalent unit, per 1,000km. One TEU is the standard size of a container and a measure of capacity in the container business.
Already, rail freight costs in India are higher than world standards. The cost of moving 1 TEU over 1km in India is 50% higher than what it costs in the US, according to the industry.
The cost of moving a loaded 20ft container from Tughlakabad near Delhi to Jawaharlal Nehru Port, or JN Port 1,448km away near Mumbai, is between Rs16,450 and Rs27,600. Haulage charges account for about 70% of the total operating costs.
The previous increase in haulage charges for container cargo was on 1 November 2006, two months before the railway ministry allowed private companies to operate container rail freight services, ending Concor’s monopoly.
Today, 13 private companies compete with three state-owned firms—Concor, Central Warehousing Corp. Ltd and Krishak Bharati Cooperative Ltd—in India’s container trains market.
An agreement with these operators on 4 January 2007 for running container trains allows the ministry to revise the haulage charges twice a year. Any increase or decrease in rates is typically passed on to exporters and importers. About 30% of India’s container cargo of 7 million TEUs a year is transported by rail, and the rest by road.
“Higher haulage charges will deter diversion of traffic from road to rail, and make India’s exports and imports uncompetitive in the world market,” said an official at India Infrastructure and Logistics Pvt. Ltd, a private container train operating firm. He did not want to be named.
After private firms started operating, container traffic moved by rail rose 23% from 2.1 million TEUs in 2006-07 to 2.58 million TEUs in 2007-08, as these companies started running about 50 new rakes.
Another 50 rakes are expected to be operational in the next few months. One rake comprises 45 wagons and each wagon is capable of carrying either one 40ft equivalent unit or two TEUs.
Concor, which moved 2.4 million TEUs in the 12 months to March, has the biggest share among container train operators in India.