Rlys may lose freight traffic to road

The fuel adjustment component (FAC) introduced for rail freight is likely to push up the transport charges by 5.8% and may result in traffic moving away from the state-run transporter to trucks as moving goods by road will get even more attractive. The 5-6% decline in road freight rates over the past few months will add to the competitiveness of trucks, industry players said.

The freight increase will cost the Railways some of the premium cargo moved by it (such as cars) and help consolidate truck freight rates. “The dynamic fuel surcharge will result in a freight change twice a year. Rail transportation of cars will, therefore, become progressively more expensive as we are likely to see an upward revision in diesel prices,” said R Sethuraman, director, finance and corporate affairs, Hyundai Motor India, which continues to use Railways along with road transport for movement of its vehicles.

At present, road transport sector has around 80% share of country’s freight, while Railways’ share has been steadily decreasing — from 32% in 2002 to 20% at present. Industry estimates suggest that the share of cement, which is one of the major bulk cargo items, has dropped by 8-9%. Items like iron ore, coal, steel, fertilizer, petrol product and cement constitute 90% of rail cargo. With transporters getting huge number of heavy duty and multi-axel trucks, some of these major cargos are also getting shifted to the road transport sector.

Absolute comparison of freight charges for each category of items shows that rail charges are less. But factors like safe delivery, continuous availability of booking and delivery point within business centres/markets and business hubs, along with personalized service and better claim settlement make road transport sector more attractive. About 95% of the parcel cargo is transported by road.

The new announcement has not gone down well with the market. “A 5% increase in freight rates from April 1 will generate higher revenues to Railways, but it also runs the risk of losing its already dwindling market share to roads and highways. While improvement in connectivity to mines is a welcome step, increase in freight will not only push up steel prices, it will also add to inflationary pressures,” said Dilip Oomen, MD, Essar Steel.

Industry experts said the focus should be on increasing the speed of cargo delivery than comparing whether it would entail loss for Railways or road transport. “We have a record of cargo moving 30 km per hour by road and 25 km by train, which is dismal. There is a need to bring down our logistic expense to 7% of GDP, which is at present 15% of our GDP,” said S P Singh, convener, Indian Foundation of Transport Research and Training, an advocacy group.


Highlights of the Railway Budget 2013-2014

First time in the UPA regime a Congress Minister presented the Railway Budget, which was politically correct. While a direct hike of an average 5-6 per cent on frieght rates was announced, Pawan Kumar Bansal touched passenger fares indirectly by effecting marginal increases in charges like — superfast trains, reservation fee, clerkage charge, cancellation charge and tatkal.

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The Minister, while preparing the ground for passing on any fuel price increase to the users, said that subsequent increase in rates of diesel in January has added Rs 3,300 crore to the fuel bill of railways, taking a substantial portion of the additional resources targeted.

Besides, electricity tariffs are also revised periodically, he said.

Rail freight hike on diesel may lead to rise in retail prices

“The increase in fuel bill during 2013-14 on account of these revisions in 2012-13 alone would be more than Rs 5,100 crore. In the light of deregulation of diesel, Railways finances need to be rationally insulated and to this end a mechanism to neutralise the impact of fuel prices on operating expenses is required to be put in place,” the Minister said.

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Freight tariff

In Budget 2012-13, it was propsoed to segregate fuel component in tariffs as fuel adjustment component (FAC). “I propose that his component be dynamic in nature and change in either direction with the change in fuel cost, say, twice a year,” the Minister said.

Bansal has proposed to implement the fuel ajustment component-linked revision in only freight tariff from April 1, 2013, “As regards passenger fares, since these were revised only in January this year, I do not intend to pass on the additional burden now and the railways will absorb the impact of Rs 850 crore on this account,” he said.

Besides, talking about Railway finances, he also spoke about green initiatives, job opportunities by creating rail-based industries, ppp projects, catering, rail tourism.

Highlights of the Railway Budget 2013-2014

67 new express trains to be introduced; 27 passenger trains and 5 EMUs.

An independent Rail Tariff Authority has been formalised.

Railway revenues to show a balance of Rs 12,506 crore in 2013-14.

Planned investment of Rs 63,363 crore for 2013-14, including Rs 600 crore from PPP route.

Explanatory Memorandum of Railway Budget 2013-14

Plans for 22 new lines.

Electrification of 1,200 km of tracks this year.

Estimate for 2012-13: Freight target at 1,047 mt, which is 40 mt more than current year. Revenue target set at Rs 93,554 crore for frieght.

5.2 per cent growth in passengers targeted; earning target at Rs 42,010 crore.

Rs 3,000 crore loan from Finance Ministry repaid with interest by Railways this financial year.

IRFC to borrow Rs 15,103 crore next year

Speech of Pawan Kumar Bansal introducing the Railway Budget, 2013-14

Passenger revenue revised estimates at Rs 32,400 crore, lower by Rs 3,573 crore from Budget estimate. Operating ratio expected to improve to 87.8 per cent in 2013-14 from 88.8 per cent in the current fiscal.

Strict financial discipline measures: 347 projects have been identified as priority projects and to complete them in timebound manner; Judicious mix of funding is required.

Proposed to set up debt service fund for servicing of JICA and World Bank loans for dedicated frieght corridor.

Mountain rails in India will be revamped on the lines of what has been done in Austria and the Swiss Alps. No specific deadlines, though.

Freedom fighters’ passes renewal only after 3 years against every year now.

Arunachal Pradesh will also be brought into the rail network for the first time.

New coach manufacturing and maintenance facilities to be set up in various places including Rae Bareli, Bhilwara, Sonepat, Kalahandi, Kolar, Palakkad and Pratapgarh

Financing: Setting up of Indian Railway Institute of Financial Management at Secunderabad.

Set up a Chair at TERI for railway related research.

Multi disciplinary training institute at Nagpur.

Staff requirement: To fill up 1.5 lakh vacancies. Construction of staff quarters in PPP mode. Provision of quarters for single women.

Railway production units: Special drive for scrap disposal. Rs 4,500-cr target for 2013-14.

Railways set to enter 1 billion tonne freight club of China, Russia and US.

Green energy initiatives: Setting up of Railway energy management company. 75 MW windmill plants. Ban use of plastics in catering. 1,100 level crossing to be powered by solar/wind energy.

Set to attract Rs 1 lakh crore investment through Public Private Partnerhsip route in 12th Plan.

Rs 1 lakh crore each for Railway Land Development Authority and Indian Railway Station Development Corporation.

Revamped policy partnership with ports, mines etc. A model that will be a win-win for both.

Common rail-bus ticket to be introduced for Katra-Vaishnodevi pilgrims

60 more ‘adarsh’ stations will be rolled out.

Need-based rail connectivity to East

Freight loading to be 38 million tonne more than 2011-12 at 1,007 million tonne.

Azadi Express connecting places associated with freedom movement.

Executive lounges in four more stations including Patna, Nagpur, Jaipur, Visakhapatnam.

IRCTC Web site: Internet booking to be strengthened with next-gen e-ticketing system to eliminate delays.

Identification of 104 stations for upgradation in places with more than one million population and of religious significance.

Real time information will facilitate: 7,200 tickets per minute as opposed to 2,000 this system will facilitate and will support 1 lakh 20,000 users as opposed to 20,000 users today. Internet booking hours will be increased from 12.30 a.m. to 11.30 p.m. E-Booking will also be expanded to allow bookings through mobile phones.

Use of Aadhaar by Railways: Real time information to passengers: Internet booking and e-ticketing. SMS alerts to passengers. Railways will use Aadhaar database for bookings and validation of passengers.

Special A/C coaches Anubhuti with latest modern services to be introduced in select Shatabdi and Rajdhani trains with commensurate fare.

Mechanised laundry and electronic display on board on trains.

Putting up of six additional Rail Neer bottling plants, including at Vijayawada, Nagpur.

Extensions of bio-toilets on train.

Spells out safety measures to avoid accidents at level crossing. To prepare corporate safety plan for 10 year period. Elimination of 10,700 unmanned level crossings targeted during the Plan; no more new such crossings to be created.

Resource constraint cannot be an excuse for sub-standard services.

Losses to Railways on account of passenger traffic likely to mount to Rs 24,600 crore in 2012-13 from Rs 22,500 crore in 2011-12.

Rs 1 lakh crore will be raised from public-private partnership, Rs 1.05 lakh crore through internal resources in the 12th Plan.

12th Plan railway size will be Rs 5.19 lakh crore, with gross budgetary support of Rs 1.94 lakh crore. Internal resources target for the 12th Plan seems to be a tall order. Raising Rs 95,000 crore in the next four years requires a paradigm shift in revenue generation.

In the 11th Plan, Railways fell short of target for doubling and gauge conversion. But met target for new lines and electricfication.


Draft Policy for Rail Terminals at Ports

The efforts of the railways to provide linkages with ports by setting up terminals at ports cannot come at a more appropriate time.

Once a popular mode of transportation of cargo, railways have been losing market share to other modes of transport in the country. The freight share of the railways in 1951-52, for example, was 79% as against 21% of the road freight share. During the period rail freight enjoyed total dominance of bulk cargo as well as retail parcel cargo on the medium and long haulage. However, over the last 60 years the table has turned around and now road freight enjoys 80% share with rail having a claim of only 20%. According to Delhi-based Indian Foundation of Transport Research and Training, there could be number of reasons for this reversal, but the gradual weakening of rail freight due to negligible investment on replacement and expansion of rolling stock. “Despite economies of scale and lower freight charges, the road freight/ truck transport has expanded at a very rapid pace with the entry of high tonnage and high volume trucks and trailers operating with single all India permit trunk routes with ubiquitous presence covering last mile destinations,” it said.

Early this month the ministry of railways released a draft policy on rail terminals at private ports. It seems to be part of a serious effort to fill the gap in physical infrastructure that exists today and to provide last-mile rail connectivity. “At a time when most of the ports are gearing up to expand their capacities and capabilities to the expected surge in trade in the coming years, railways are on the right track, at least in thinking,” said a port official from Mumbai.

The policy aims to set a framework of development of rail terminals and associated logistic facilities for cargo handling and other related activities at privately developed ports.

On the look of it, the draft policy appears quite attractive and it gives amble evidence to suggest that the railways is willing to learn from mistakes and undo the damages that the department made during its earlier attempts of public-private partnership ventures.

For example, the policy draft says that there would not be any terminal charges levied by the railways on such terminals.
More importantly, the operator will be free to fix tariff for such services offered by him at the terminal. The developer will also be able to independently recover various service charges from its customers for the services provided at the terminal. Similarly, free time for loading and unloading will be as per railways rules. There will also be no wharfage levied for rakes handled in the facilities.

The draft also promises connectivity to the terminals from the nearest suitable railheads. The project would be contracted for 30 years and renewable afterwards. It also stipulates that the port rail terminal has to come up within two of years of signing the contract with the railways.

To make the policy attractive for investors, railways is not levying any security or licence charge. However, the port authority will bear the entire cost of the terminal. All consignment booked to and from the port rail terminal will be prepaid.

According to official sources, the ministry is getting encouraging responses from the industry stakeholders to its request for feedback on the draft paper. “It would take us some time to consolidate and a final policy is put in place,” ETSL was told.

Though the draft policy appears attractive for investors, many in the industry, and especially those who have already joined hands with the railways for transportation of containers, are waiting with crossed fingers for the final policy to make its appearance.

“We were also shown a rosy picture when the department announced its privatization programme of moving containers by rail,” said a private container rail operator. “But you see what is the status those 16 odd players who have taken the licenses. If the ministry wants to attract private investment to its ventures, it should first undo the damage it has done to those who are left stranded and bleeding today for no fault of theirs. Only such a measure could instill confidence among the investors, not otherwise,” he concluded.