Railways need stability in haulage charges
The Indian Railways is a key element of the infrastructure platform needed for economic development. As the Railway Budget 2016-17 is being planned by the government, CARGOTALK took the opportunity to speak to a industry veterans to know their expectation
Managing Director, Indialinx
The Railway Minister, while presenting the Rail budget for 2015 suggested that the total investments in railways would be ` 8,56,020 crore over next five years. He also suggested that the railways would look at raising funds from private participation and FDI, besides JVs with PSUs and other options. The opening of railway to private participation is indeed a step in the right direction. If private investment in railway is to be encouraged, it is essential that the railways have a level playing field vis-à-vis the competing modes of transportation. Railways compete primarily with the road transport and to some extent with coastal waterways in providing the services of transportation. If we look at actual performance of container traffic, we find that between the first three quarters of 2014 and 2015, while overall container volumes have grown at a slow pace of more than 2.5 per cent across ports, there has been a decline (negative five per cent) in volumes moved to ICDs. During the last five years, the share of rail traffic as compared to road for container movements has also dropped from an already low level of around 25-26 per cent in 2008 to less than 20 per cent at present.
The two primary reasons for this diversion stem from the high cost of rail transport (based on rail haulage charges levied by Indian Railways on private container train operators), and an unfavourable service tax regime that has now put railway transport at a disadvantageous position vis-à-vis road transport as well as coastal transport. There have been nine revisions in the Rail Haulage Charges (RHC) since 2006 while the general rail freight has been revised only five times. At a time when trade volumes are dropping and rail capacity is reportedly idling to the tune of 20-25 per cent, the Ministry of Railways continues to levy a 10 per cent Port Congestion Surcharge (PCS) which was first imposed in 2014. There was a 27-41 per cent increase in haulage charge at the beginning of this year, which has also had a severe impact in terms of raising the cost of rail transport and the shift of container volumes from rail to road. The current year has seen an estimated drop in rail-based volumes to the tune of almost 15 per cent as has been reported by some of the container train operators.
On the service tax front, with effect from April 1, 2015, transport of goods by rail service now attracts the full service tax of 14 per cent if CENVAT credit of excise duty paid on inputs, capital goods and of service tax paid on input services is availed. The abated value of 30 per cent can be availed on the condition that CENVAT credit is not availed. This amendment has been brought to provide a uniform service tax regime applicable to transportation of goods by rail, road and coastal waterways. It may be noted that for transport of goods by rail services, post April 1, 2015, the service tax incidence has gone up from 3.71 per cent to 8.47 per cent, whereas for road, the comparative figure for tax incidence is almost 300 basis points lower at 5.6 per cent. Both the issues of high cost of rail haulage and the unfavourable service tax structure need to be considered by the railway and finance ministers in the upcoming rail and union budgets.
CEO, Kribhco Infrastructure
Railway, considered as the lifeline of the nation, had three distinct advantages over road carriage–bulk movement, better transit times especially over long distances and competitive rates. With overloading of trucks, two drivers per truck and dropping diesel prices, all these have been neutralised. The budget can provide the much needed relief in the haulage charges for container rakes, abolition of port congestion charge and guaranteed transit times for both EXIM and domestic streams of traffic.
Focussed attention is required to shift road-borne cargo to rail by reducing the overall rail logistics cost and realising the dream of ease of doing business with the railways. Time-bound responsiveness and responsibility to address the issues of the Container Train Operators and the Terminal Operators should be the mission of the year.
COO, Adani Logistics
Indian Railways has suffered from years of low investment and populist policies of subsidised fares. This has turned a once-mighty system into a slow and congested network that crimps economic growth. Though fuel consumption per tonne per km is cheaper in rail as compared by road, then also railways are fast losing freight carriage market share to road transport and now only account for 31 per cent of the freight traffic in the country compared to 90 per cent in 1950s. Since diesel prices have been on a slide, huge expectations have built up on whether or not the government will go ahead and hike passenger fares and freight charges. There is a general expectation that the freight rates would be reduced due to the fall in diesel prices.
What the industry expects:
Container train industry to be treated at par with other railway freight traffic and the government should announce reforms for the CTO industry to boost private investments.
Industry experts railways to commit timely delivery of goods. railways should run the freight trains like passenger trains that are time-scheduled freight trains on all-major routes to ensure better customer service.
As the existing rail network is not adequate vis-à-vis the burgeoning rail freight business, it should be expanded and dedicated freight lines should be upgraded or accelerated to avoid congestion on the operative routes. The number of existing rakes, wagons rakes should also be substantially increased to cater to the increasing demand.
As proposed by Indian Railways earlier, it should work towards the development of multi-modal logistics park along the eastern and western freight corridors much earlier than the freight corridors are established. This will ensure road and rail traffic flows to get oriented by the time the freight corridors are operational.
It is expected that the government will not announce any further fuel hikes in its upcoming budget. and port congestion surcharge to be removed. Also timelines for formation of rail tariff regulator should be announced.
Managing Director, CRWC
In the last railway budget, a lot of emphasis was given to the generation of investment and encouraging PPP projects. Substantial investment is coming into this sector and long pending projects are gaining steam. Dedicated Freight Corridor is also likely to become a reality by 201819. There is no doubt that these initiatives will bear fruit soon bringing in benefits to the logistics sector as a whole and transforming the railways. With the drastic reduction in diesel prices, railways is facing stiff competition from the road resulting in diversion of traffic to road. Freight rates need to be rationalised to compete with the road rates, especially in sectors like cement, parcel and container train operations. Railways have to come up with better facilities for steel handling at railway yards and construction of silos for cement, food grains to facilitate bulk movement.
Technology upgradation is another priority area which can boost efficiencies. From the trade perspective, guaranteed transits, scheduled time table, reduction in demurrage, transit losses, speedy settlement of claims, competitive freight rates are the drivers that will determine continued patronage to the railways. infrastructure upgradation combined with service orientation will help the railways to command the towering heights of Indian economy.
Director, Gateway Freight
Continuous haulage hike is a problem. Perhaps it works for the government because of many factors such as revenue and the difference in import and export but practically this increases the logistics costs. Despite having such a vast rail network, road is still cheaper than rail and takes lesser time to move the cargo. In the current state of railway infrastructure, the container doesn’t move from the outer gate of ICD to inside in one week. The duty structure needs to be operated efficiently. All the railway freight forwarders should be invited for taking any important decision.