Pvt container trains get foothold

With the entry of 14 private companies in the container train business, a sea change is visible in terms of efficiency and improved realisation per rake. The private firms are getting around 12 per cent higher return per rake, at about Rs 19 crore, compared to the earlier government monopoly, Concor.

However, huge infrastructure cost is denting financial viability of the business for private CTOs and some are even thinking of exiting the business. A questionnaire sent to Concor did not get any response.

An official in the Association of Container Train Operators (CTOs) said, “The efficiency of the container business has improved but the container train operator industry is still not breaking even. About a third of the Rs 3,000 crore invested by the industry in rolling stock in the past three years has been after the entry of private operators.” A 350-rake capacity was added during this period.
 

THE NEW LOOK Comparison between concor and 14 private players (2010-11)
INFRASTRUCTURE STRENGTH	CONCOR	14 private  players
Number of rakes	240	127
No of terminals	61	6* 21#
Business volume carried by railways (36.86 mt of container traffic)	27.75	9.11
Business Value (containers and logistics) in Rs  crore (approx)	4,030.18	2,400.00
Average realisation per rake per year in Rs  crore (approx)	16.79	18.89
* Commissioned    # Planned and expected to be commissioned by 2012-13

Focusing on the premium National Capital Region-Mumbai route, private CTOs are investing hugely in capturing the export-import (exim) market. The commissioning of terminals by CTOs at Patli, Kishangarh, Ghariharsaru, Sahnewal, Kalamboli and near the Jawaharlal Nehru Port and using some of the private sidings near the NCR and Mumbai have helped them take away a substantial share in the exim business. Another 21 terminals are in the pipeline and likely to be commissioned by 2013.

What works to their advantage is the backing by shipping lines and aggressive pricing.

Some CTOs have captive cargo. Besides, they are more flexible in their pricing. This flexibility is also forced by the fact that the railways levy stabling charges for the detention of privately owned stock at railways premises’ not meant for handling such stock. It is, therefore, in their interest to keep moving their rolling stock, said one CTO official.

Exim focus
According to one operator, “The focus seems to be shifting towards the premium segment in the exim business, to offset the squeezing of profit margins in the domestic business after the imposition of differential haulage rates.”

The exim business is comparatively profitable to service, as compared to domestic business. The latter has limited terminal handling revenues, due to limited or no customs clearance.

The revenues can be enhanced by the value-added services of warehousing and packaging, said an expert in logistics.

Almost 60 per cent of the exim container volumes is handled through the Jawaharlal Nehru Port Trust, at Navi Mumbai. In the exim business, a balance between export and import volumes ensures return loads and reduces empty running for an operator, thereby improving utilisation and turnaround of rakes.

This enhances operator profitability on an exim route vis-à-vis the domestic sector, as there are no set routes for the latter stream of business, and players have to develop and create routes. Further, the time sensitivity attached with exim cargo sometimes enable operators to charge higher rates for timely movement.

The share of exim in container traffic has come down from 76.8 per cent in 2008-09 to 72.4 per cent in 2010-11. The downturn abroad is one reason.

Rate issues
The CTOs have some problems. Apart from lack of terminal access, the rate policy of the railways do not favour the carriage of low weight and high volume, high value goods. Hence, it is difficult to crack the sophisticated logistics market of high-end goods, said a CTO official.

As rail haulage pricing is based on the maximum gross-weight of payload plus tare for a wagon, even when lower loads are actually carried, haulage of volume-based and light cargo on rail becomes unattractive. Said an expert, “This is one of the common problems in logistics’ rating.”

The railways’ differential pricing for carrying bulk traffic exceeding one third of the rake size has hit margins on domestic cargo, transportation by rail often less competitive compared to road. “The proliferation of small terminals, leading to fragmentation of the market, time consuming aggregation and lower economies of scale have added to the problems,” said the CTO official.

The railways moved around 30 per cent of international trade traffic handled at major ports in 2010-11.The remaining cargo was moved via road. In the domestic segment, 65-70 per cent of the total freight movement is by road.