Auto firms cool to railway hubs

Eight months after the railway ministry announced its intention to develop automobile and ancillary hubs on railway land, industry players have said the plan can succeed only with proper incentives. The Society of Indian Automobile Manufacturers (Siam) says discounts on haulage and freight rates are needed to make transportation of automobiles by railway viable.

“Currently, transportation of automobiles by railways is 15-20 per cent higher than the cost incurred for carriage via road. There is a need for a minimum 20 per cent discount on container haulage and over 35 per cent discount on current new modified goods (NMG) freight rates to bring it at par with transportation by roads,” said Siam Senior Director Sugato Sen.

Siam wants an average eight acres for each of the nine identified centres among Santragachi, Siliguri, Ranchi, Guwahati, Patna, Hosur, Ernakulum, Vijayawada, Delhi cantonment, Palakkad, Kharagpur, Challapalli and Kalamassery.

While the idea is yet to take a final shape in India, railway networks in developed countries already transport a major chunk of automobiles and the cost there is 10 per cent cheaper than roadways. For instance, in the US, 70 per cent of automobile transport is via railways, while it is 35 per cent in Europe and 16 per cent in China.

On the contrary, in India, just five per cent of cars are transported by railways. Close to two million passenger vehicles were sold in the country in 2009-10.

While the long-term freight policy will bring in private players, including ‘Third Party Logistics’ (3PLs) to run these auto hubs, the Ministry of Railways recently released a policy on ‘Development of Automobile and Ancillary Hub’.

According to this policy, land shall be given on licence basis, initially for a period of seven years on an ‘as is, where is’ basis. “While Indian Railways will charge only licence fee for land usage, the licencee would be allowed a maximum period of one year from the date of handing over the land as gestation period to complete construction of the hub in all respects and make the same operational,” a senior official at the railways ministry told Business Standard.

“The agreement would be for a period of seven years, extendable every year thereafter on the basis of a review carried out by the zonal railways, based on the performance and terms & conditions of the policy,” he further added.

While the railways ministry feels these auto hubs, once established, would contribute a revenue of Rs 1,000 crore each year, officials at Siam point out that it would also lead to an immediate increase in transportation of automobiles by railways, from the present five per cent to 15 per cent.

“The railways’ contribution to automobile transport is likely to go up to 25 per cent in the next three-four years. This would mean lesser transportation time as well as freight cost for car manufacturers, especially in far-flung areas where road connectivity is poor,” Sen added.