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

Cargo Talk - - Front Page - KAL­PANA LOHUMI

Man­ish Puri

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.

Amit Chaudhri

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.

Vivek Sharma

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.

KU Thankachen

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.

Pu­jan Sharma

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.

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