High­lights of KPMG Re­port on Par­cel Cargo Busi­ness

Cargo Talk - - Logistics Services -

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.

Reg­u­la­tory sce­nario

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.

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