Private container players bring Concor's near-monopoly to an end

With just over a year since the railway ministry allowed 14 private companies to handle container transport operations, the private container-train players are closing in on government-owned Container Corporation of India (Concor) and winning business away from road transporters.

Logistics analysts predict that Concor's near-monopoly market share of 95 per cent will fall to 75 per cent this financial year (2008-09) given capacity additions and investments in capacity expansion by the private container train operators.

The number of private container trains is expected to nearly triple to 120 by the end of this fiscal from 45 currently. The private players are also expected to invest about Rs 1,200 crore in capacity expansion. During the same period, Concor will increase the number of trains by just 13 per cent to 168 from 148, investing about Rs 600 crore.

The railway sector's share in transport vis-a-vis roadways' is also expected to change as a result of private container expansion. The railways, including Concor and the private players, account for 35 per cent or 794 million tonne of freight loaded. This is expected to go up to 40 per cent. 
 

NUMBER OF CONTAINER TRAINS OPERATED BY PRIVATE PLAYERS
Company	At present	By April 2009
Inlogistics Solutions	10	23
Boxtrans Logistics	12	24
Gateway Distriparks	7	20
Arshiya International	0	10

The private firms compete with Concor mostly for cargo meant for exports or imports, and with the roadways for domestic cargo movement.

"In our export-import or exim operations we charge the same rates as Concor. In our domestic operations, where our main competitor is the roadways sector, we offer our customers a competitive rate," said Rajguru S Behgal, chief manager, ICD (Inland Container Depot) Garhi Harsaru, Gateway Rail, an Indo-Singapore joint venture (JV) formed by six entities.

Others say the competition is limited with roadways. "We expect the share of rail-freight traffic to increase at a compounded annual growth rate of 10 to 15 per cent, mainly driven by robust gross domestic product (GDP) growth and exim trade. This will automatically benefit all container operators in the railway sector," said Sankalp Shukla, executive director, Inlogistics Solutions Ltd, a container cargo operator floated by Bagadiya Brothers Pvt Ltd and Bothra Shipping.

The private companies are increasing market share by a multi-pronged strategy. This includes setting up of ICDs (for loading and unloading containers) close to industrial and export hubs like Gurgaon, Ludhiana, Faridabad, Mumbai and West Bengal, and building warehousing facilities (which road transporters have only a few) in major locations like Ghaziabad, Chennai and Navi Mumbai.

They are even providing door-to-door service by tying up with road transporters, a service not being offered by the railways. The private container operators are also scaling up their operations (see table).

To ensure better service to customers, private companies are also tying up for warehousing. Boxtran Logistics, a subsidiary of JM Baxi & Co and United Liner Agency of India, has tied up with Central Warehousing Corporation (CWC).

It is also setting up a logistics park at Sonepat in Haryana. Boxtran, one of the first private companies to offer container rail services in India, also plans to set up 12 ICDs in the next three years at different locations.

The company operates a fixed schedule between Delhi and Mundra port, and Delhi and Vizag. It also has a chartered service between Rourkela and Mandi Gobind Garh in Punjab for vehicles, sponge iron, barley, agriculture and steel products.

"To provide door-to-door service to our customers, we have hired 100 trailers on lease from different companies and also run 3,000 cars of Suzuki Motors," said a senior Boxtran executive.

InLogistics Ltd, which carries steel, building materials, foodgrain, and automobile parts, amongst others, between Rourkela and Punjab, Rajasthan and West Bengal, and Orissa and Hyderabad, will be setting up ICDs in the northern, central and eastern India.

"We provide a very efficient service to our customers. For example, in Rajasthan, we pick up marble right from their production units using our own trailers up to the rail terminal and get it transported to their final destination. All these services are provided at an attractive package," says Shukla.

A Boxtran executive says, "We pick up Maruti Suzuki cars from their factory in Gurgaon to our ICD at Loni and get it transported to their final destinations like Vizag and Bangalore. Now it takes four days to reach Bangalore by rail, which otherwise took five days by road."

Experts opine that the added advantage that private container operators have over Concor is their ability to take decisions quickly and provide customised solutions according to their customers' requirements.

So, how is Concor responding to the new challenge? Concor Managing Director Rakesh Mehrotra said: "To maintain our market, we have planned an investment of around Rs 700 crore in this financial year. We are following a very dynamic pricing policy to retain our customers. We expect our exim operations to grow at a rate of over 15 per cent and the domestic business to grow at more than 20 per cent in 2008-09."

Industry experts, however, say that Concor faces a major challenge from the private players in the coming years. "If they offer substantial discounts, they will feel the pressure on their operating margin. And if they don't give the discount, its market share may be substantially eroded," said an analyst.

But it will take a while for private companies to match the kind of infrastructure that Concor offers, he added.

"Currently, we use the road transport system to move our goods. But we will be switching over to the railways as the cost of transporting bulk and heavy materials is cheaper through railways. And we would choose the service provider according to their level of efficiency," said Anshuman Singh, CEO, Futures Logistics.

Meanwhile, road transport companies say that the private operators will only help them indirectly in expanding the business. "Since private operators do not have the infrastructure to provide doorstep service to the customers, they will have to depend on the roadways sector. So, the growth in their business will help us," said Vineet Agarwal, executive director of Transport Corporation of India.

Either way, the battle for land freight will spell great news for customers.