Railways need to bring down logistic costs
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The remarkable financial turnaround achieved by Indian Railways is not only evident from its profits of Rs.25,000 crore and high operating ratio of 76% but the innovative features such as the provision of door-to-door logistic services, facilities of warehousing, multi-modal logistics parks besides discount on ‘reverse routes’ to encourage reverse logistic supply chain etc. Freight Rationalisation of freight tariffs in the last four years have yielded Rs.14,000 crore of additional revenue by incremental loading of 230 MT. Additional earnings of Rs.2,000 crore through freight have been generated through lean season discount and peak season surcharges without any increase in the freight tariffs across the board. |
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By Ganesh Kumar Gupta President, FIEO |
The anticipated increase in freight towards the end of the 11th Plan (2011-2012) would be 1100 MTs and an additional capacity of 310 MTs is to be added in the next four years. An investment of Rs.75000 crore in 7 years is envisaged to provide for this addition since more than 75% of railway goods traffic moves on 20,000 kms of rail high density network which is fully saturated and work in excess of capacity. The dedicated freight corridors (DFCs) – Eastern Corridor from Ludhiana to Dankuni near Kolkata of 1280 kms and Western Corridor from Delhi to JNPT to commence work from 2008-09 would ensure decongestion of cargo. Besides, the railways is also planning to set up commodity-wise trade corridors which would act as feeders to the main freight corridors. These measures are expected to improve the market share not only in the carriage of bulk and non-bulk freight traffic but also of containerized cargo for exports which at present is 26 MTs and is targeted to increase to 100 MTs by the end of the 11th plan.
Freight Cost
As per the Working Group on Logistics for the 11th Plan, the cost of moving container by rail between Delhi and Nhava Sheva is around Rs.0.87 (1.9 cents per km) for an average container of 15 tonnes and a 20-footer while the actual costs are 0.61 to 0.63 per tonne km. However, exporters have to bear costs of a minimum of Rs.1.5 per tonne km (3.3 cents) after taking into account costs such as charges at ICDs/Terminal Handling Charges/rail-road costs of empty container repositioning etc. The overall logistics costs need to be brought down substantially for the export sector by effective empty container repositioning and better cargo dynamics to bring about rationalization in freight tariffs.
While the rail road connectivity projects during the 11th Plan include Paradeep, Ennore, Chennai, Tuticorin, Cochin, New Mangalore, Marmagao JNPT, Mumbai and Kandla, at present, work has been completed for Hassan-Mangalore serving Mangalore port, and that for Vallarpadam new line for Vallarpadam inland container transshipment terminal is under progress. Projects are being financed under the SPV model or in the case of road connectivity projects for roads BOT model is more viable/feasible for implementation. While the overall expenditure for the next five years is approximately Rs. 2.3 trillion, funds for railroad connectivity are earmarked at Rs. 40,000 crore and there is an apprehension that gaps in requirements will need to be made through Ministry’s market borrowings and Public-Private-Partnership (PPP) support.
In order to reduce logistic costs, the following would be required:
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Connectivity of ICDs to gateway ports: Since the dedicated freight corridor may not become reality during the 11th Plan, there may be a need to expedite regular scheduled rail services between ICDs and gateway ports and in this connection, the rail connectivity projects being undertaken under National Rail Vikas Yojana (NRVY) could also be expedited and completed on priority to provide the necessary support to Exim Trade.
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The double stack trains have reduced unit costs by better asset utilization and increased throughput for given line capacities for Mudhra Jaipur and Pipavav. There is a need to provide double stack trains connecting Kandla and Mumbai for decongestion/ better offtake.
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As per an IL&FS study, containerized cargo handled during 2005-06 was 4.61million TEUs and with a CAGR of 13.56% and the growing requirements of Exim Trade, the number of ICDs required in the next 5-7 years would be 40 in addition to the existing 45. Systems/logistical hubs for facilitating movement of groupage containers from port to port and ICD to ICD similar to ICD gateway ports need to be created to facilitate Exim Trade.
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There is a need to connect the 388 clusters in 21 States with the North-South and East-West Corridors, which would facilitate the off take of manufactured goods from these clusters to the Gateway Ports. Contiguous with the expressways, the existing clusters located on the North-South corridor (for e.g. in the case of UP - Mathura, Agra) which is also common to the Golden Quadrilateral and those clusters located in the East West corridor (for e.g. in the case of UP – Kanpur, Lucknow, Gorakhpur, Muzaffarpur) where the Sikandra–Kanpur stretch is also common to the Golden Quadrilateral, could be developed as major logistics hubs considering the proximity of identified clusters at these locations.
A commodity-wise analysis with regard to railway bottlenecks indicates that in the case of exports of iron-ore for example, the following issues are to be addressed:
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Procedurally, a policy of preferential allotment of rakes known as committed block traffic (CBT) is followed wherein preference is given to integrated steel plants, followed by domestic sponge iron producers and finally exporters. In other words, exports are given the lowest priority. On the Eastern circuit, transportation to Paradeep is undertaken through a longer route of 665 kms. The Keonjhar and Nayagarh sidings are not in operation. In case of sidings of Tomca, Nirgundi, Sambalpur and Hirakund, the road bridging is more entailing longer transportation by railroad and therefore higher logistics cost (as high as $28 per tonne). It may be noted that 22% of country’s total iron-ore export are accounted for by the three Eastern ports and, as a result of the poor railroad connectivity in the region, suffer due to high logistic cost.
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8th FIEO-IIFT Short Term Refresher Programm |
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FIEO (Northern Region) in association with IIFT, New Delhi is organizing the 8th Short Term Refresher Programme on International Trade as per the details placed below:
The Programme will cover: · Review of National Foreign Trade Policy; · Overview of Customs & Excise Rules/Regulations covering Export-Import Transactions; · Framework of International Trade Documents · Export Incentives including Duty Drawback Scheme · Understanding the Implications of WTO · Market Entry Strategies – Finding of Importers · Use of Internet for Exporters – Finding Buyers, Sourcing, Business Intelligence, Networking, Online Auctions, etc. · Export Finance Schemes – Facilities to Gold Card Holder – Cost Reduction Approach · Introduction to ECGC Policies, Guarantees & Claims for Export Payments · Understanding Schemes of Managing Currency Risk in Export Transaction, Hedging, Understanding of new UCP 600.
Specialists from IIFT, trade-related Ministries and FIEO will constitute the faculty and a Certificate will be given on completion of the Programme.
For more details and participation, please contact,
FIEO (Northern Region) at 011-46042118, 46042121, 46042172. Limited seats on first-cum-first served basis |
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