Railway container business in incubation
When privatisation of railway container business was
announced in 2006, it was widely expected that rail freight would see an
increase in market share. However, present-day realities depict a grim picture,
O.P. Jain, President & CEO, Transport Corporation of India Ltd.
The transport infrastructure sector in India is witnessing a
lot of action. More and more large infrastructure projects are rapidly being
commissioned and implemented. This has had a multiplier effect on the entire
economy, especially the logistics sector. Logistics has evolved from being
concentrated on road freight to other modes such as air, rail and sea freight.
Logistics and its importance has increased manifold with business players
discovering the benefits of hiring outside, or third party logistics experts to
manage the total flow of products, from raw materials to finished goods through
a mix of multiple modes of transportation.
In the last decade, rail freight has been gaining significance. This can be
judged by the fact that rail logistics occupies 30 per cent of the transport
market in India. Eight-nine per cent of rail freight traffic is contributed by
eight major commodities - coal, fertilisers, cement, petroleum products, food
grains, finished steel, iron ore and raw materials to steel plants. In early
2006, when the railways announced its move of privatisation of container
operations, the logistics industry was set for a roll as private sector received
the first major opportunity
to invest in the railways that was controlled by Container Corporation of India
(Concor). With the country's booming export-import trade, the containerised
movement of cargo by rail was supposed to be the next big thing in terms of
logistics. It was expected that the railways would take away share of business
enjoyed by the road freight sector.
However, industry analysts believe that the result has not been as expected.
Lack of infrastructure like freight stationsócontainer freight stations and
inland container depotsówhere cargo consolidation and deconsolidation take
place, are some of the reasons cited for disruption of plans of private players.
Congestion on the rail network is also a key factor in new players not investing
in container trains.
First, it is important to understand that the privatization of container trains
in isolation cannot boost the rail freight business. There are a host of allied
factors including supporting infrastructure, reduction in user fees etc. that
would need to be introduced. Companies who have not invested in container trains
are still offering rail based solutions to customers through existing tie-ups
with Concor. For example, TCI has tied up with Concor to provide comprehensive
rail-road based 'door-to-door' logistics and warehousing' services for all
categories of customers.
No threat to road freight
Second, the privatisation of container trains is unlikely to impact the road
freight business. This is because of a host of reasons. Road freight has the
advantage of its 'Last Mile Service'; it offers both pick-up and delivery at the
customers' premises. In the case of railways, since it involves multiple
handling, resultantly there are delays. In the present scenario, consumers are
extremely time-sensitive and particular. Due to a plethora of options available,
they want the best product, at the best price at the right time and place. Road
transport is a more controlled and portable medium.
One of the most critical aspects where surface road transport scores over
railways is that of pilferage. 'Skillful pilferage' is still rampant in railways
while it is negligible and very often controlled in the case of surface road
The railways, most importantly, lack in providing an integrated transportation
and delivery solution to customers. This is because there is absence of a
seamless integration between the railways and the postal department. Surface
road transportation, on the other hand, pioneers in offering not just goods
transportation but an all-encompassing solution that includes bulk primary
transportation, intermediate storage, bulk-breaking and express distribution of
smaller consignments. As businesses seek to gain competitive advantage through
cost cutting measures, this becomes a vital aspect of transportation. Moreover,
railways are economical where over 800 km to 1,000 km of distance is involved.
India is an important and growing sourcing, manufacturing and consuming market.
To sustain the growth, Indian markets need to provide customers with inventory
management capacity supported by quick, efficient and reliable inter-modal
services that complement our global ocean transportation and logistics offerings
for both inter-country and cross-country operations. Intermodal transportation
reduces cargo handling and so improves security, reduces damages and loss and
allows freight to be transported faster. In a way, a shipment can be made
complete in all respects from one interior point in the country to another or
from one country to another under single contract, single freight and single
document. In the near future, inter-modal transportation will definitely emerge
as a strong medium for carrying out inter-country and cross-country operations.
The railways ministry has already planned to introduce a slew of measures to
help boost the containerised movement of cargo. It has already begun running
double-stack container trains on diesel routes and is now looking at running
them on electrified routes. The ministry has finalised plans for triple-stack
container trains on electric routes for domestic movement of cargo. It is also
planning to set up many more inland container depots and warehouses to meet the
huge rise in railway freight traffic. To new container operators, it has already
provided its old terminals to be used as ICDs until their own infrastructure is
More importantly, the ministry hopes that the dedicated freight corridor would
eventually sort out any congestion on the railway network due to the large
number of private container trains plying on it. However, ground realities
reveal quite a grim picture and there is need for a greater overhaul of the
railway system before containerised movement by rail really catches on.
[May 19-25, 2008]