Few takers for railways’ auto freight scheme

The Indian Railways’ automobile freight trains operator scheme has evoked a lukewarm response with just one automaker and logistics provider evincing interest five months after the launch.

Maruti Suzuki, the railways’ biggest automotive client, is the only automaker to have placed orders for rakes under the scheme. Delhi-based logistics provider APL Vascor has signalled its intent to sign an agreement with the Railways.
Industry body Society of Indian Automobile Manufacturers (SIAM) said its members are reviewing the new policy.

“There are a few issues. For instance, the rates proposed by the railways are not competitive for short distance movement as compared to road. Also, some type of concession to recover the investment made for purchasing the rakes would also be desirable,” said Sushil Kumar, an adviser at SIAM.

“The auto sector is in a downturn, so everybody is waiting for someone else to invest,” said a senior railway ministry official involved with the issue. “Maruti, our biggest customer – they constitute 60% of our auto traffic – is on board. APL Vascor’s licence should be finalised soon. The others are waiting and watching…a couple of Japanese companies like Nissan have approached us. It will take a year to take off at least,” the official added.

Nissan refused comment on the policy but said it is not looking at using the railways for transportation of its cars.

MM Singh, chief operating officer (production) at Maruti Suzuki, said his company has placed an order for three rakes.

“Each railway rake will have a capacity of moving around 300 cars in one go. The company plans to gradually transport more and more cars by railway rakes. Based on the experience of the initial three rakes and the business needs, we will consider inducting more rakes for transportation of our cars,” Singh said.

People close to the matter said that even Maruti has not yet signed a concession agreement as the railways is finalising it based on the new automobile freight train operator policy. “The railways are in discussions with the stakeholders and have sought their views for this. We too have shared some inputs for their consideration. We are hopeful that this will be finalised soon,” Singh said.

Experts said the discontinuation of rebates provided in the earlier policy and charges on movement of empty rakes could limit private investment in the scheme.

But the Railways seems to be in no mood to offer more relaxations. “The current rates for running automobile rakes are quite low and they have been fixed in a very transparent manner,” another railway official said. “We are charging for empty runs because we need to cover our own costs and so that the operators are forced to develop new routes. We are not looking at giving any more concessions in the policy.”


Railways to tweak rates to attract more vehicle freight

The Indian Railways is working out a fresh automobile freight train operator (AFTO) policy, which will open the sector for investors such as Maruti Suzuki and APL Logistics subsidiary APL Vascor.

Both the firms have been in talks with the Railways and have made initial investments to enter the sector. At present, about 5 per cent of the total automobile movement in the country happens by rail, according to industry estimates.

The earlier operator policy, which was formulated about two years ago, failed to attract investors.

According to the policy, companies have to pay Rs 5 crore to get an AFTO licence for 20 years, extendable by another 10 years. Firms can invest in specially designed wagons to offer transport services. They have to pay freight charges to the Railways.

Railways freight rate structure, which was earlier perceived as complex, will be simplified.

“We have simplified the rate structure in the new policy. There will be two freight rates — one for loaded trains and another for empty trains,” Suhas Kumar, Advisor (Freight Marketing), Indian Railways, said. “The policy is in its final stages,” she added.

Special wagons

Maruti Suzuki has already invested and acquired a patent for a wagon design developed by Railway Designs and Standards Organisation. Similarly, APL Vascor will get specially designed wagons from Titagarh Wagons, William Villalon, Vice-President, Global Automotive APL Logistics, and Chairman, APL Vascor, said.

The specially designed auto wagons can carry 318 small cars a train. At present, the Railways moves about 150-170 cars a train, or 270 cars a train depending on the kind of train.

Pointing out that close to 70 per cent of vehicles move by rail in the US, Villalon said there is a huge growth potential in India.

Kumar said that the Railways had put a charge on empty movement of wagons not just to cover costs, but also to ensure that any automobile manufacturer that get into this sector do not waste the capacity to prevent competitors from using the service. In fact, container-train operators also have to pay haulage charges for both loaded- and empty-wagon movement.

Meanwhile, automobile manufacturers have stated that they are keen to shift to the Railways, as highways get congested, making it difficult to move large trucks.

Deepak Sharma, Head-Logistics, Hero MotoCorp, said they moved about 6 per cent of two-wheelers by trains now and are already in talks with APL for their services. Sugato Sen, Deputy Director General, Society of Indian Automobile Manufacturers, said that automobile manufacturers would like to move a fourth of vehicles through the Railways.