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

Cargo Talk - - Front Page - ABEER RAY

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?

En­hanc­ing con­nec­tiv­ity

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.”

Re­mov­ing bot­tle­necks

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.”

Rais­ing cash

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

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