A ‘track’ to put cargo on wheels
While on one hand the government has laid out its plan to connect ports with railways and has invited the private sector to collaborate, on the other hand problems like cash crunch still impale development in the sector. Industry insiders believe there is
Even as the government has made clear its intension to bring rail connectivity to the ports, the shortage of resources and reluctance of private companies to invest in freight lines due to procedural hurdles pose a stiff challenge to this goal.
The Railway Budget 2014-15 had highlighted the government’s aim to connect ports through private participation. The recent news of JSW Jaigad Port getting rail connectivity with the Konkan Railway also stands out as an example of the government resolve in this regard. However, the Indian Railways have always allowed limited private participation and the difficulty to attain approvals have pushed away private players from investing in freight lines. In the backdrop of such restrictive policies the government is now finding it hard to attract private participation.
Infact, the government has also gone to the extent of allowing companies to part own new rail lines for variable periods of time rather than a fixed number of years with the Railways deciding to assume the project’s financial risk. But will that suffice to bring connectivity to the ports?
While some believe the government’s attempts in this regard have been feeble, Anil Yendluri, Director & Chief Executive Officer, Krishnapatnam Port said the target is possible and achievable, “In fact, railways is one of the most essential links in the supply chain management. Rail connectivity plays a key role in the smooth functioning of a port.” Also sounding a hopeful note
MA Bhaskarachar, Chairman cum Managing Director, Kamarajar Port said, “Absolutely, it is possible to have rail network with 12 major ports and minor ports also.” Ravi R Gaitonde, Chief Operating Officer, APM Terminals Mumbai (Gateway Terminals India) too emphasised on rail connectivity for ports, “The last mile connectivity for ports is very crucial.” The challenges & opportunities
Despite the push by the government, ports have so far found it hard to build new rail lines to meet the expected doubling of cargo capacity. Enumerating challenges that the ports face, Rajiv Agarwal, Chief Executive Officer and Managing Director, Essar Ports, said, “Various approvals are required for development of railway projects, including approvals from Railways and other government authorities. Land acquisition for laying of the railway tracks is a major problem as acquisition of land across long stretches encounters various villages and a large number of stakeholders are involved.” On this issue Gaitonde said the key lies in timely completion of projects, “In general, land acquisition and environmental clearances remain a challenge. Timely completion of projects also holds the key. However, the challenge needs to be seen in the perspective of faster and seamless evacuation of cargo. Limited rail infrastructure has meant high pressure on the road infrastructure. On a positive
note, the Dedicated Freight Corridor, due in 2017, is expected to facilitate and ease cargo evacuation. Also, private players are now allowed to part own new rail lines for variable periods of time rather than a fixed number of years. Availability of wagons and railway engines will be critical to success of these measures.”
Cyril C George, Chairman, Mormugao Port Trust indicated that one of the ways out is to bring about better coordination with the ministry. “For providing new railway lines, the projects are to be submitted to the Railways Ministry and in most cases the ministry is approving
and implementing the projects. As such better coordination with the ministry is required to implement railway connectivity projects in a time-bound manner which would enable ports to enhance its capacity,” he said.
Emphasising that the core challenge is related to funds,
Arunendra Kumar, Former Chairman, Indian Railway Board said, “The first challenge is funding. Cash crunch has always been the problem with the Railways.”
Reaping the benefits
Given the tangible and intangible benefits that rail connectivity with ports would provide, the Indian Railways is keen to move further with the decision to connect ports despite the challenge involved. The Railways now has in hand, link projects with private investments to connect ports such as Pipavav and Mundra. Talking about the benefits that would accrue, Yendluri said, “The Railways has a direct bearing on import/export trade and consequently facilitates in building the economy of a country. Apart from the manufacturing, ports also support all the other major or minor sectors and play the role of a catalyst. Railways provides benefits such as easier, faster and economical, besides large volume carrier and providing excellent connectivity across various locations.”
Agarwal too emphasised that connectivity with ports will significantly improve the cargo handled by the
railways. “It will make various new investments in the railway infrastructure financially viable as overall traffic for the Indian Railways system increases. On the other hand for the customers it will reduce the total logistics cost and eliminate multiple handling of cargo,” he said. Bhaskarachar added, “The government of India is encouraging the manufacturing and processing sector which could provide expansion of port capacity in terms of handling import and export of cargo. In fact, the timely evacuation of imported or coastal cargo will bring tangible benefit to the port with customer’s satisfaction and make ports congestion-free.”
As per a recent industry estimate, the port operators will spend an estimated $8 billion over the next two years to expand capacity to meet the rising imports. Essar Ports has already expressed desire to build new rail line to meet an expected doubling of its cargo handling capacity to 200 million tonnes in the next few years. Dwelling on the challenges before last mile connectivity Agarwal said, “Land acquisition for railway project is extremely difficult as a thin strip of land is required for long stretch; it increases the number of stakeholders. Also various other approvals are required for crossing of the road and water bodies.” Talking about Kamarajar Port Bhaskarachar said, “For the upcoming container project, Kamarajar Port has taken ini- tiative to develop dedicated railway siding and network for container movement from mid of 2017. Also considering the present development or expansion proposal, Southern Railway has also commissioned third line between Athipattu to Chennai and fourth line construction is in progress, which could improve further evacuation system of the Kamarajar Port.”
In the backdrop of a creaking infrastructure, the government has been considering all avenues including forging public-privatepartnerships, to support the growth in freight traffic in ports. Given that the Indian Railways allows limited scope for private participation, the government is gradually moving towards working out a plan that would bring connectivity to ports.
Yendluri said that the sector might get a boost as the government is now pro-FDI, “PPP ventures are soon gaining popularity as well. These will help raise equity and infuse funding into the sector.”
However, Agarwal stressed that the Railway needs to be more accommodative of the requirements of ports. “Investment on the railway project for port connectivity may not be viable on a standalone basis but it will bring additional traffic to Indian railway in their existing network hence increasing their revenue. Hence, a model for railway connectivity needs to be developed considering overall benefits to the full system and not on standalone basis,” he said.
Considering the limited private participation allowed by the Railways and the target of $1 billion of private investment to build rail lines to the ports, Bhaskarachar said, “Private participation in port development via rail connectivity in India is in initial stages. Once technical and financial feasibility are established, the investment will naturally come. Many railway joint venture companies are making good profits. Hence, India will be able to manage private investment if issues like land acquisition and faster clearances are taken care of.”
As private companies have been holding back from investing in freight lines, Tushar Pandey, Senior President, Public and Social Policies Management (PSPM) Group, Yes Bank indicated that the market will have an appetite for both EPC and PPP models: “It is imperative that both these approaches are nurtured to ensure competitive complementarity.”
Anil Yendluri Director & Chief Executive Officer Krishnapatnam Port
MA Bhaskarachar Chairman cum Managing Director Kamarajar Port
Ravi R Gaitonde Chief Operating Officer, APM Terminals Mumbai (Gateway Terminals India)
Rajiv Agarwal Chief Executive Officer and Managing Director Essar Ports
Cyril C George Chairman Mormugao Port Trust
Arunendra Kumar Former Chairman Indian Railway Board
Tushar Pandey Senior President, Public and Social Policies Management (PSPM) Group, Yes Bank