Highlights of KPMG Report on Parcel Cargo Business
According to the KPMG Report, the current share of rail in parcel/non-bulk cargo is limited. However, the sector has significant potential, as acknowledged by Rail Vision 2020. With respect to parcel cargo, golden quadrilateral provides a viable business opportunity.
Rail parcel business has grown at modest CAGR of 6.5 per cent in the period 2007- 12, particularly compare to road (12.4 per cent). Against it, the growth in rail parcel business, in value terms, has been 12% CAGR in the same period. The significantly higher growth in value terms is driven by increase in freight rates.
Going forward IR has estimated growth rate of 6.6 per cent. While, it is in line with the historical growth, is significantly lower than the targeted growth in Railway Vision Document. As per Rail Vision, the parcel business was targeted to reach ` R1,644 crore by 2012.
More importantly, the parcel business was targeted to reach ` R8,000 crore by 2020. However, the plans for XII Plan are significantly lower. The actual performance in the initial days of the XII Plan has been still modest. In the period, April – November 2013, the volumes have decreased marginally compared to volumes for the same duration in the last year.
The KMPG Report unveils that parcel cargo is essentially non-bulk cargo and covers wide array of cargo including white goods, paper, textile, engineering goods, FMCG, perishable goods. The existing rail parcel business is R 1,500 crore on an annualised basis. Rail parcel business has grown at modest CAGR of 6.5 per cent in the period 2007- 12.
In terms of additional cargo, automobile components, textile, FMCG, automobile may present a viable opportunity subject to policy and operational reforms in rail parcel business.
Existing rail parcel business models
The Parcel Cargo in Indian Railways is handled through three models— IR Booking, lease of parcel space on SLR/AGC/ VP and lease of parcel express trains.
While, the first two mediums have been fairly popular, the investment in the third mode has fallen behind. On the other hand, IR has reservation about handling parcel cargo in the passenger area.
According to the Report, the combined effect is that the segment has grown slower than the estimates made in the Rail Vision Document.
Policy for leasing of Parcel Cargo Express train to private operators is the central policy for lease of VPU trains. Based on the discussion with customer, freight forwarders and other stakeholders, it is understood that there are some concerns regarding the policy, which is relatively lower term of the lease, rake composition and there are certain operational issues which are also constraint to the private investment in the service, weightment, lack of assurance on time schedule, pilferage and dispute resolution.
The existing policies for private investment in rolling stock also do not allow for investment in the parcel vans. It is suggested that IR may amend policies to include VPU under LWIS scheme.
However, on a principal level, it is suggested that IR may issue a omnibus policy for private participation in rolling stock instead of specific policy to ensure coherence. On design aspects, IR may look to move to a policy regime which may specify only limiting condition (wagon dimension, tare weight, axle load etc) for design of wagon instead of detailed design. It will allow sufficient flexibility to customers while keeping the safety and operational considerations of IR intact.