It has been almost four years since the container train industry was opened up to private participants, thereby ending the monopoly enjoyed by the government-owned Container Corporation of India (CONCOR). While the going for new entrants has not been easy, and the sector has been through difficult times, the rationale for the decision to deregulate still remains, and it may be interesting to observe how various licensees have adjusted to the challenging environment.
It was in early 2006 that 14 companies purchased licences to operate container trains in India. These included Adani Logistics Ltd, Boxtrans Logistics India Services Ltd, Container Corporation of India (CONCOR), Central Warehousing Corporation, Container Rail Road Services Pvt Ltd, Delhi Assam Roadways Corporation Ltd, Emirates Trading Agency, Gateway Rail Freight Pvt Ltd, Hind Terminals Pvt Ltd, India Infrastructure & Leasing Pvt Ltd, Innovative B2B Logistics Solutions Pvt Ltd, Pipavav Railway Corporation Ltd, Reliance Infrastructure Engineering Pvt Ltd and SICAL Logistics.
The rationale offered for deregulation of the sector included the need to increase competition, increase the share of the railways in container movement and enhance logistics efficiencies in the country (by some accounts logistics costs in India were estimated as being 13 per cent of GDP, as against 9 per cent of GDP in the USA). It was also understood then that with rapidly expanding EXIM and domestic trade as well as the low prevailing levels of containerisation in the country (30-35 per cent, as against an international standard of about 70 per cent), there was tremendous scope for growth of container traffic in the country. Indeed, the fact that Indian container traffic had been growing at a CAGR of about 12.5 per cent between 2001-02 and 2005-06, made the sector appear extremely attractive to the private sector.
This initial enthusiasm however began to die down within a year’s time, particularly after the signing of the concession agreement between the 14 licensees and Indian Railways in early 2007. This is borne out by the fact that since then only two more entities (Kribhco and Arshiya International) have purchased licences. The concession agreement contained several clauses perceived by private players to be detrimental to their interests. One such clause, for instance, allowed the Indian Railways (the only entity allowed to haul a container train operator’s rakes) to increase haulage charges twice a year. Further, the agreement did not address the licensees’ demand for transit time guarantees from the railways.
The problems of the licensees attempting to begin operations were further compounded by external factors, such as the initial shortage of wagons and the economic crisis that began towards the end of 2008. Perhaps the most difficult task at hand for non-CONCOR licensees however, continues to be the development of well located Inland Container Depots (ICDs) and Domestic Container Terminals (DCTs) to support their train operations. This is particularly challenging, since the acquisition of land for ICDs can be expensive and time consuming. While a few ICDs have been developed by some private container train operators, they are unlikely to be able to match CONCOR’s network of 59 ICDs in the near term.
The new entrants in the sector have reacted to these challenges in a variety of ways. A substantial number of private container train licensees have been able to operationalise to various degrees over the last couple of years. The initial frenzy of rolling stock acquisition had subsided some time ago, particularly after the slowdown of the world economy and resultant slowdown in trade. The shortage of rolling stock was soon replaced by a surplus, with licensees even beginning to lease excess wagons to one another. Diverse strategies have also been employed by the new container train operators for gaining access to ICDs at key locations. These include initial agreements by some container train operators with CONCOR for using its ICDs in return for an access charge, as well as the development of their own rail-linked ICDs. Further, a few stand-alone ICDs, such as ICD Loni and ACTL’s ICD at Faridabad, have also emerged as common- user facilities servicing the operations of several container train operators on the NCR-JNPT/ NCR-Mundra routes.
Container train operators have also started voicing their concerns to the government in a more organised manner and have been offering arguments against major haulage charge increases by the railways. They have also been seeking transit time guarantees from the railways as well as some sort of a level playing field vis-à-vis CONCOR. These efforts have achieved limited success. For instance, Indian Railways has for the benefit of all container train operators designated certain railway goods sheds as Common Rail Terminals (CRTs) for the loading and unloading of containers on trains. Also, the railways have recently offered container train operators an assured transit time (ATT) service, subject to the payment of a premium over normal rates. At the same time, container train operators appear to be quite worried by the sharp increases in haulage charges by the railways over the last few years. Also, the delay in the development of the dedicated freight corridor between NCR and JNPT is being viewed by the container train industry as a cause for concern.
Despite the less than satisfactory results achieved since its deregulation, the importance of the container train industry to the growth of the Indian economy cannot be overemphasised. It is thus essential that all stakeholders, including the railways and the container train operators, work to ensure that the running of container trains continues to remain a viable business and is able to attract the capital investments needed for its growth.