The Hindu Business Line : The guarantees and gaps

Even as the Indian Railways has not given in to some of the demands of container operators in the recently-signed concession agreement, it has put in several guarantees that would make it pull up its socks and improve performance, say Ministry officials.

The Railways on January 4 signed the concession agreement with 14 companies that had acquired container-operating licences on rail tracks after paying a total of Rs 540 crore as registration fee.

The service guarantees

The service guarantees extended by the Railways include completing wagon maintenance of a rake within six hours and providing locomotives within four hours of an operator placing a demand. In case the Railways is unable to adhere to these time limits, it would compensate the operators by providing discounts in haulage charges.

However, container operators feel there are gaps in the guarantees extended by the Railways. The Railways has assured that it would `normally' complete the intensive train examination within six hours, but would pay compensation — called `stabling charges' — only if it is unable to complete the wagon maintenance within 24 hours. Thus, even if the Railways takes 23 hours for maintenance — thus detaining wagons of an operator — it does not have to pay any penalty. In this backdrop, several operators may prefer to opt for setting the wagon maintenance facilities themselves rather than using the Railways' facilities.

According to an industry official, with wagons for each rake (of 45 wagons) costing about Rs 12 crore, the capital cost of detaining a rake works out to about Rs 3,000 per hour. Now, each loaded container rake can earn about Rs 5,000 per hour on an average. Thus, the total cost of an idle rake works out to Rs 8,000 per hour. And if the Railways were to complete maintenance within two hours, which is possible given the present maintenance system, the rake can be run for that many extra hours. Running a rake for extra hours would improve the operator's revenue earnings potential significantly.

Another point of concern for the operators is the clause as per which the Railways has reserved the right to notify "special rates" for specific commodities and seek haulage charges equivalent to what it would charge its end customers for that commodity. As of now, the Railways has imposed haulage charges for overall container movement based on weight and distance of containers. So, the haulage charges for container movement are not directly linked to the commodity that the container operator moves within its boxes.

However, if this clause is used — which is likely if container operators eat into the Railways share of heavy haul traffic — that latter can ask the operators to pay higher haulage charges for a specific commodity being moved in a box. In effect, this can make movement of a particular commodity by containers very expensive, thus discouraging containerisation of that particular commodity.

EXIT CLAUSES

The Railways, however, has built in fairly comfortable exit clauses for the operator, wherein it has assured repayment of registration charges in case the operator has to exit from the business owing to default on the part of the Railways. The defaults include failure on the part of Railways to comply with provisions in the agreement and not compensating the operator within three months of the payment due date.

So, if the agreement is terminated due to default in the Railway's administration, the Railways would have to pay 150 per cent of what the operator has paid as registration fee. And following such a move, if the operator were to sell its wagons to the Railways, the company would be paid 120 per cent of the depreciated replacement value of those wagons by the Railways.

MORE OPERATORS TO TAKE LICENCES

Having issued the operating licences to 14 players last year, the Railways has again opened the container operating licence window this year. And since the agreement is firmly in place, the Railways hopes to bring in more operators into the arena this year.

Fourteen operators that acquired the licence last year are Adani Logistics Ltd/Mundra Port & Economic Zone Ltd; Boxtrans Logistics India Services; Container Corporation of India (Concor); Central Warehousing Corporation; Container Rail Road Services; Delhi Assam Roadways Corporation Ltd; Emirates Trading Agency; Gateway Rail Freight Pvt Ltd; Hind Terminals; India Infrastructure & Leasing; Innovative B2B Logistics Solutions; Pipavav Railway Corporation; Reliance Infrastructure Engineering; and SICAL Logistics

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