Building capacity

Cargo terminals will boost efficiency

The Ministry of Railways, as reported by this newspaper on Monday, is looking to offer 200 Gati Shakti Cargo Terminals to private firms and freight operators. The move must be welcomed because it will not only put railways land and related assets to better use but also improve capability in the logistics sector. According to government estimates, the 200 new terminals would need investments worth Rs 12,000-14,000 crore. The move, in fact, will take the policy announced in September 2022 forward. The Union Cabinet had then approved a policy on long-term leasing of railway land for activities such as cargo handling and building public utilities. The policy included the plan to build 300 Gati Shakti Cargo Terminals over the next five years.

The policy broadly enables long-term leasing of railway land for building cargo-related facilities for up to 35 years for 1.5 per cent of the commercial value of the land per year. The allocation is made through competitive bidding and the development of cargo terminals is estimated to generate 120,000 employment opportunities. The railways plans to start the bidding for the 200 cargo terminals as soon as the process for the first 100 such terminals is completed. As things stand, 77 such cargo terminals have been commissioned with an investment of Rs 5,400 crore. Some big names operating such facilities include the Container Corporation of India, Adani Group, JSW Group, Indian Oil, and Nayara Energy.

The policy of building 300 cargo terminals over time will yield multiple benefits for the railways and the economy as a whole. The railways will not be incurring additional expenditure in this area. The successful bidders for these terminals will bear the cost of building the facility and take the business risk, while the railways will have the ownership. Further, improved logistics will help generate additional cargo traffic for the railways and boost its revenue. According to estimates, every new cargo terminal would have the potential to increase volumes by 1 million tonne per year, yielding an additional flow of about Rs 100 crore.

It is often argued that the Indian Railways has plenty of surplus land, which is not being used efficiently. Building cargo facilities will certainly improve the efficiency of rail assets. Better cargo facilities — depending on various value-added services being provided at such facilities — should encourage internal trade in the country, improving efficiency and boosting ease of doing business. High logistics cost is often said to be one of the big constraints in doing business in the country. Although road infrastructure has improved significantly over the past few years, cargo movement by rail is more cost-efficient, provided it is managed well and last-mile connectivity is not a problem. With the development of 300 cargo terminals and the design of the Gati Shakti platform, which reflects all infrastructure development, some of the long-standing constraints will be eased. The Indian Railways has lost much of its cargo business to the road sectors, largely due to its own inefficiencies and partly because of significant improvements in road infrastructure. However, the development of cargo terminals and substantial government capital expenditure to improve the railways’ overall capacity, in general, should help it regain the lost freight traffic, which will also help India contain carbon emissions.