The Hindu Business Line : Boxed in by slowdown

The downturn could not be the best of times for those in the transport sector, certainly not for those engaged in the running of container trains, no matter whether in the public or the private sector. Take, for example, Container Corporation of India (Concor) under the Railway Ministry. An estimated 80 per cent of its throughput relates to export-import (exim) traffic. There has been a sharp drop in export traffic due to the drop in demand for our exports in western countries. As a result, there is an imbalance in traffic to the extent of around 20-25 per cent.

For example, at Jawaharlal Nehru port, Concor loads on an average 20 rakes a day, all imports. However, the cargo inducement in the reverse direction, that is, on New Delhi-JNPT section, is just enough to load about 15-16 trains. Understandably so. In the present situation, one cannot expect the Americans or Europeans to buy carpets.

The plight of the private container operators is reportedly even worse. Some of those who were handling only exim traffic and operating trains only between New Delhi-JNPT are now believed to be placing their rakes for the domestic trade, which, it is presumed, is not as badly hit. But then domestic trade has its own problems. There cannot always be adequate point-to-point traffic. For example, almost every other private container train operator these days is rushing to Rourkela for loading steel items for transportation to various parts of the country.

PRICE UNDERCUTTING

There is a concentration of sponge iron units and mini steel plants in and around Rourkela. But there is hardly any incoming traffic to Rourkela with the result the empties are being moved over a long distance and thus repositioned at a cost. This has thrown up yet another problem — price undercutting. The extent of undercutting is anybody’s guess. There may be other “incentives” to trade also for opting for a particular service in preference to others.

Will the situation turn for the better in near future ? Difficult to predict, say those already in the business of running container trains. The improvement of exim traffic will depend on the recovery of the world economy over which our policy-makers have little control.

As for the domestic trade, the view is that green shoots have already started sprouting in India unlike the rest of the world because it is reported that in India some sectors are already showing signs of an upswing. For example, the country’s largest power generation company and largest oil refining and marketing company are raising huge loans to fund a slew of projects.

But it is also felt that much would depend on the policies to be pursued by the new government being installed at the Centre. According to some experts, the situation will turn for the better from August/September as by that time a clear picture should emerge about the new government’s policies, thus bringing an end to the “dry season” that exists at present.

Surprisingly, only a few months ago, the containerised traffic in the country was growing at a CAGR of 12.5 per cent, leading many experts to project a throughput of 10 million TEUs by 2010 and 20 million TEUs by 2020. The projections were not without basis. The list of commodities being transported by containers was witnessing a steady increase. Commodities as diverse as cars and rolled steel were being transported in containers.

Private investment

It was estimated, about 50-55 per cent of export cargo was containerised as compared to closer to 80-85 per cent in developed countries. So there was scope for more containerisation. As the economy expands, the demand for premium containerised services would increase. According to one estimate, of a total freight market of 2,700 million tonnes, roughly 10 per cent, or 15 million TEUs, is expected to be containerisable.

The road sector, however, continues to account for the larger share of the container movement. An estimated 65 to 70 per cent is transported by road while less than 30 per cent by railways. Till about three years ago, Concor was the sole player in the railway container freight market and was predominantly catering to large customers and full container load volumes. In 2006, the private sector was allowed to invest in container trains.

However, after three years, the container rail traffic did not receive the kind of boost that was expected of the private sector participation. In other words, it is now clear that private sector participation alone could not revolutionise the rail movement of containers.

This is because, as it is pointed out, private sector investments in supporting infrastructure is lacking. Many private container operators have so far stayed away from investing in terminals, cargo handling equipment, IT systems and even rakes.

They complain of the lack of a comprehensive railway land use policy and absence of level-playing field and insist on rationalisation of haulage charges by the railways, and a review of the present concession agreement … the list is long. The new government at the Centre, it therefore appears, may be required to take a fresh look at a sector still at a nascent stage and struggling to keep its head above the waters.

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