Railways look to regain business lost to road

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The only significant announcements on Thursday were over the development of new north-south, east-west and east coast freight corridors

Railway minister Suresh Prabhu has made a strong pitch for getting back business the national transporter lost to the road sector, but stopped short of pronouncing path breaking ideas to implement it.

While keeping the freight rates unchanged in the rail budget presented in Parliament on Thursday, Prabhu has done little more than pay lip service to prevent any further erosion in business.

He has reiterated measures that he has talked about since presenting last year’s rail budget, particularly pertaining to a review of tariff policy and improving warehousing and transportation facilities.

The three solution sets for addressing the issue – expanding the freight basket of Indian Railways (IR), rationalising the tariff structure and building terminal capacity, is on the table for some time now with little or no progress.

The only significant announcements on Thursday were over the development of new north-south, east-west and east coast freight corridors to ease pressure on existing lines. In addition, work on existing eastern sections of dedicated freight corridors have been put in the mission mode with a completion target of 2019.

“The modal share of IR has been consistently declining over a long period of time. We are determined to reverse this slide,” Prabhu said during his more than an hour-long speech in Parliament.

According to the report prepared by Axis Capital for the railways, inefficiencies and under-investments have led to rail losing freight to the road sector.

The share of rail as percentage of transportation capex is down to 30 per cent in the 11th plan period (2007-12) from 56 per cent in the 7th plan (1985-90). During the same period, the share of road sector has grown from 22 per cent to a healthy 40 per cent. Moreover, IR’s share in freight has also declined from 62 per cent in 1981 to 36 per cent in 2012, even though tariff remains cheaper than road. Rail ministry data shows that even though rail freight rate has increased by 40 per cent and road freight rate has gone up by 15 per cent in FY11-14, rail tariff remains cheaper at Rs 1.38 per tonne per km against road cost of Rs 2.12 per tonne per km.

The internal target set by the ministry is to take up railways’ share in total freight to 45 per cent by 2024 from the current 36 per cent. But this would be tough ask considering freight earnings target has been revised downwards to Rs 1,11,853 crore for 2015-16 against budget estimate of Rs 1,21,423 crore. “We are disappointed that our demand for freight reduction in view of the fall in petroleum prices has not been considered. The railway ministry should therefore not be surprised if its share in freight traffic comes down further as road transportation has been far more responsive in rationalising freight rates,” said JK Lakshmi Cement whole time director Shailendra Chouksey.

The rail minister said that freight basket of IR is dominated by 10 bulk commodities, which enjoy a share of around 88 per cent. “We need to look beyond these to expand our revenue base,” the minister said. The plan is to focus 40 additional product categories including auto and FMCG for increasing the basket size. In addition, the strategy on the freight side is also to open the container sector to all traffic, barring coal and specified mineral ores, with permission for carrying part-loads during the non-peak season. The national transporter would also run timetabled freight trains and special commodity trains on a pilot basis.

The rail budget has also reiterated review of the current tariff structure to evolve a competitive rate structure, vis a vis other modes, permit multi-point loading/unloading and apply differentiated tariffs to increase utilisation of alternate routes. The possibility of signing long-term tariff contracts with our key freight customers using pre-determined price escalation principles will be explored, which would provide predictability of revenues to IR and of costs to our customers, Prabhu said.

“Sail welcomes the budget proposal to explore the possibility of signing long-term tariff contracts with key freight customers and appointment of key customer managers to liaison with its major freight stakeholders,” said Sail chairman P K Singh. Another old theme, strengthening warehousing and transportation facilities, has found mention in the rail budget. “At least 10 goods sheds will be developed by TRANSLOC in 2016-17,” the minister said. Prabhu that a policy on development of cold storage facilities on vacant land near freight terminals would be announced in three months.

subhashnarayan@mydigitalfc.com

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