Railways expects Rs 1 lakh cr investment in PPP projects

The Indian Railways expects Rs 1 lakh crore investment in PPP projects in the 12th Plan period (2012-17), said Manoj Singh, Advisor-Transport, Planning Commission of India, on Wednesday.

“During the 11th Plan period, the Railways received a mere Rs 3,000 crore investment through public-private partnership route. We expect PPP investments in the current plan Period to be worth Rs 1 lakh crore,” Singh said while addressing a CII seminar on logistics here.
The Government has chalked out six unique models to relax the norms to attract more PPP investments.

Singh added “underfunding” has been a major challenge in expanding rail connectivity.



Published in: on July 27, 2013 at 4:02 pm  Leave a Comment  
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New freight corridor to be first of its kind

Plans to build 3,338-km Dedicated Freight Corridors (DFCs) on India’s eastern and western flanks may soon see the light of day, with railways minister Pawan Kumar Bansal announcing that civil contracts to build 1,500 km of tracks will be awarded this fiscal. Before the UPA-II completes its term, the first stretch of DFC lines – the 66km line from Sonnagar to Mughalsarai – will become operational.

Once the project is completed, India can actually take the credit of having re-written the history of logistics. The DFC – once built – will be the only multi-commodity and multi-destination freight network in the world.

A freight train running on DFC tracks will carry four times more cargo.

The DFC is also seen as a game-changer for its ‘force-multiplier’ effect. The DFC tracks will enable de-clogging of the choked arteries of the mainline tracks.


Private parties to develop freight terminals

ALLAHABAD: In order to strengthen freight traffic, the railway authorities have decided to develop freight handling terminals with the participation of private sector. Under the plan, private freight terminals (PFTs) would be established at potential points across the country.

North Central Railway spokesperson RD Bajpai said that the objectives of the plan is also to divert `finished freight traffic’, predominantly moving by road so far, to rail and attain increased freight volumes by offering integrated, efficient and cost effective logistics and warehousing solutions to users. The policy seeks to supplement the in-house programme of railways by opening the area of terminal development with participation of major logistics providers to create world class facilities.

Executive director of freight marketing, Railway Board, GD Brahma has written letters to chief commercial managers of all the zonal railways for outlining the details of the plan.

The PFTs would provide various logistics related services like warehousing facilities, value addition services like labelling, processing of goods and convenience centre etc.

Such terminals would be set up only on private land. However, for rail connectivity, the railway land can be offered as per rules. A PFT would be permitted to book and handle all traffic excluding outward coal, coke and iron ore traffic. All types of wagons permitted to run on IR network shall have access to the PFTs. The PFTs would function round-the-clock on all days.


Private rail: Strategies to stay on track

The Railways holds a special place in the hearts of Indians, most of whom have great memories of train journeys. But often, the impression is also of a bloated and badly run enterprise. Unde rinvestment since Independence is the key reason. This is also why the railway network has grown from 55,000 km in 1947 to just 63,028 km in 2008.

The Railways has been in the midst of a turnaround since 2004. The entry of private operators in containerised rail transport is expected to spur investment. Private rail will be a game-changer for the logistics industry.

Many industrial units in the country have been set up for tax reasons, which means that often transportation defies logic but represents a big opportunity.

In 2004, 13 licences were initially awarded to private players in the box-train sector, followed by two more. The industry seems to go through three stages — euphoria, reality check and maturity. The euphoria was reflected in the number of players that applied for licences, some for speculative reasons. However, there is no scarcity value as licences can be awarded every year. So money has to be made the hard way, by creating value, which is proving difficult.

Bypassing Concor

The second stage is a reality check, where the harsh lessons of an evolving industry are learnt. Private players initially focussed on the export/import trade, where traffic is one way — mainly from the port to the inland point but not vice-versa. In addition, more than 75 per cent of the containerised traffic plies between Mumbai and Delhi; the other significant corridors being Gujarat-Delhi and Bangalore-Chennai. Competition is fierce and the product is commoditised. Competing with the state-owned monopoly, Concor, has been difficult, as Concor penalises private players which use its rail terminals with high charges.

One way out is to build infrastructure that bypasses Concor’s facilities and establishes strong commercial ties with the customers directly. Both take time and money. The infrastructure to bypass Concor’s facilities and to be near the cargo is being gradually built around the country and the main build-out will be completed within 12 months.

Already, there are more than half a dozen rail-connected inland container depots in the National Capital Region (NCR) and the regional industry belt, and new facilities are being built outside Chennai, Bangalore, Nagpur, Rourkela and Raipur. Within a year, private operators will be able to operate a substantial part of their business outside the Concor network. This will help improve the cost structure, but the bigger challenge remains — access to customers.

Formidable competitor

In export/import trade, volumes are controlled to a large extent by the shipping lines. This is especially true of import volumes since three-fourth of India’s imports are on cost, insurance and freight (CIF) basis, as a result of which the importer has no say over the inland transportation leg from the port.

Some of the large importers may, over time, be able to negotiate inland rates, but in the vast majority of cases, the importer will not have the buying power to negotiate and the shipping lines will dictate terms. On the export front, while the customers have greater choice, the shipping lines — with or without a rail subsidiary — remain formidable competitors as they will be able to offer a total solution on the destination side.

The large shipping lines have little reason to tie up with private players as they can play the spot market or strike sweetheart deals with the monopoly player.

So, what can the private rail players do to compete? This is the stage of maturing, in which the players realise that the answer lies in segmentation and collaboration. Segmentation, in terms of geography or customers, and collaboration in terms of assets.

By 2012, the industry structure will change. Concor will settle into a long-range market share of around 55-65 per cent (down from 95 per cent in 2006).

A strong second national player will emerge, with a 15-25 per cent share and the rest will be shared by three-four players, which will be owned by shipping lines and focus on narrow trade corridors and export/import. The second national player will need to have at least three-five key hubs which it owns/controls to combat Concor’s position.

Over time, there will be only one or two players which will focus only on the rail handling. That can be a profitable strategy if at least 50 per cent of the facilities are in key locations such as Mumbai, Delhi, Ludhiana, Chennai, Nagpur, Bangalore.

Huge opportunity

The second player will have to build a successful domestic and export/import business. The ideal mix would be to bring domestic cargo to the ports where import cargo is being generated. Such a mix is possible only in Mumbai, Chennai, Bangalore, Kolkata, Delhi, where domestic and international consumption is large.

Domestic containerised transport represents a huge opportunity, considering that only five-seven million tonnes of domestic cargo, out of a total of 800 million tonnes carried by rail, moves in containerised form.

Rail transport in India will also change, thanks to the unusual combination of investment in ports along the eastern coastline and the gradual implementation of single Goods and Service Tax (GST) that will rationalise the warehousing set-up in the country.

Catch-22 situation

The investment in eastern ports will allow trade between the Far East and most parts of central and north India to be conducted through the eastern sea front.

For investors in this sector, patience and the willingness to commit large tranches of funds will be key.

Fixed costs are high and hence the high operating leverage, which means one needs to build scale and increase sales, which comes only after demonstrating investments and the ability to serve.

It is a classic Catch-22 situation. The investment risk is high but returns will be rewarding for those that survive.


Rail meet to address logistics needs

Railway Board chairman KC Jena held a high level meeting on Saturday here to discuss a detailed plan being prepared by the Indian Railways
to address the fast growing logistics needs- both for passenger and freight services- in the Greater Kolkata metropolitan area.

The plan, which is perhaps the first of its kind being tried out by the Railways’ system to tackle fast growing needs of Kolkata and its suburban area, essentially revolves around an integrated approach by Eastern (ER), South Eastern (SER) and Metro Railway to tackle the demanding transportation needs of the area over the next 15-20 years.

The meeting was attended by Deepak Krishan, General Manager, Eastern Railway, AKJain, General Manager, South Eastern Raiway and VN Tripathi, General Manager, Metro Railway and principal head of departments of all the three Railways based in Kolkata.

“A detailed and holistic plan is being worked out encompassing all the three railways, namely ER, SER and Metro to identify the needs of the greater Kolkata region. We are in the process of shortlisting a consultant who will help us prepare the blueprint for its execution,” a top Railway official told ET.

The Railways’ technical services arm, RITES, is likely to be one of the agencies shortlisted for the consultancy. “A decision on the appointment of the consultant is expected shortly. We will have to decide whether it is through an open tender or through a single tender, he added.

“We have decided on the terms of reference for the job and have completed an internal study to make a detailed assessment of the number of passengers and freight customers as well as the number of freight terminals in and around Kolkata. This will help us understand the need to either relocate or augment these terminals to meet future needs,” the official said.

The plan will be worked out with other key agencies involved in growth and development of the city namely, Kolkata Metropolitan Development Agency (KMDA).

The meeting also reviewed the performance of the three railways and also discussed the launch of Metro Railways’ extended services upto Garia. The service in that stretch is likely to operational by end of March 2009.

Published in: on January 27, 2009 at 4:22 pm  Leave a Comment  
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