Rlys offer rebate to private sector for transport of vehicles

In an attempt to raise its share in the transportation of automobiles by 10 per cent, Indian Railways has formulated a policy, which will allow logistics service providers and road transporters to induct special wagons on the railway network and avail of freight rebates in return.

The developments came after the railways decided to set up 10 automobile hubs across the country where auto components will be assembled. The railway ministry expects to earn revenue of Rs 1,000 crore per annum once these auto hubs are established and special wagons are set to run.

On the other hand, the private companies are expected to earn 500 crore per annum from transportation of cars on the railway network.

Under the Automobile Freight Train Operator (AFTO) scheme formulated by the railway ministry, private players can invest in inducting and operating special wagons on its network. They would be offered 15 per cent rebate on freight rates for every rake loaded. In case of high capacity wagons, for every increase in throughput of 10 per cent, an additional two per cent rebate on freight rates would be offered.

“The AFTO policy complements the railways’ proposal to set up auto hubs on railway land. Together, they are expected to increase the railways’ share in automobile transport by around 10 per cent over the next five years,” a senior ministry official said.

The rebate can be enjoyed for 20 years, or till recovery of the cost of investment, whichever is earlier. The maintenance of wagons would be undertaken by the railways at their own cost.

AFTOs can either operate their trains between private terminals equipped to handle the traffic or use their own sidings. They can also move between rail terminals on the railway network, provided suitable handling facility is available and subject to the payment of prescribed terminal charges.

While the idea is yet to materialise 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 done via railways, while it is 35 per cent in Europe and 16 per cent in China.

On the contrary, just five per cent of the two million cars sold in India last year were transported by the railways.

But some industry observers feel all is not lost.

“The railways’ contribution to automobile transport is likely to go up to 25 per cent as and when the infrastructure is put in place. This would mean less transportation time and freight cost for car manufacturers, especially in far-flung areas where road connectivity is poor,” said Sugato Sen, senior director of the Society of Indian Automobile Manufacturers.