Logistics: Advantage road over rail

Mamuni Das | Updated on January 27, 2018

The road to inequity: Rail-based container operators complain that the road segment enjoys a clear 7 percentage point tax advantage under GST - Photo: SUDHAKARA JAIN

Organised players in the logistics sector say the GST framework is good for them. However, train-based container train operators (CTOs) point out that that traffic in their sector has fallen sharply due to the tax advantage that GST provides road-based containers.

Road transport unions such as the All India Motor Transport Congress want GST on diesel to have a uniform price across the country, and an end to corruption in regional transport offices.

“With unorganised players facing the heat, it is good for companies like TCI, which have strong IT systems to be GST-compliant, as we get more business,” said Chander Agarwal, MD, TCI Express.

Concor, by virtue of being a large organised player, will benefit from the GST regime in terms of credit for taxes paid and business volumes, said P Alli Rani, Director-Finance, Concor.

On the other hand, GST implementation could prove to a challenge for companies that claim to be organised, but are not, particularly those who operate under the franchisee model.

The franchisees — usually smaller players — may not be fully compliant, said Agarwal. TCI Express, he added, does not operate on the franchisee model.

TCI Express has called for plying of bigger trucks, improvement in road network, lower diesel prices and an increase in permissible speeds. The post-GST story has been challenging for rail-based CTOs, who have seen a drop in volumes after GST came into force. This can be attributed to the relative advantage in the GST rate, of the order of 7 percentage points, that the road segment enjoys. In the domestic container train segment, July saw a 10 per cent drop in volumes against the same period last year, and August saw a 3-4 per cent drop; September too appears to be on the same track, according to the Association of Container Train Operators (ACTO).

Railway data show growth rates in July (8 per cent in loading and 5 per cent in throughput) and August (16 per cent in loading and 9 per cent in throughput) against the same period last year.

ACTO calculated the numbers using long-term expected growth trends as there was an aberration in 2015-16, which created a low base effect. In 2015-16, loading and throughput sharply dropped in July (by 15 and 22 per cent, respectively) and August (by 19.54 and 24.42 per cent, respectively) following a rate hike by the Railways.

“Containers moved on trucks attract 5 per cent GST, while containers moved on trains attract 12 per cent GST. How fair is that?” wondered Kamlesh Gupta, President, ACTO. The association has been calling for a national transport policy, where environment-friendly modes are given due credit. Also, inadequate clarity on billing and return filing, led to locking up of working capital.

GST’s push for cargo aggregation is a big plus, said Gupta, though he said there are teething troubles due to software and hardware problems, compounded by server crashes.

Concor set up systems to ensure timely filing of returns, though there were teething issues. Concor, which has a large number of customer transactions, roped in a GST Suvidha Provider to help upload filings on the GSTN.

ACTO welcomed the government move last week to lower the number of return filings for smaller players to five a year from the earlier requirement of 37.

Last week’s decision to give relief to exporters, coupled with strengthening of the rupee will indirectly help CTOs as higher exports will lower the export-import imbalance in cargo movement. This will increase exports, lower the empty container and wagon movement charges, all of which result in a small gain.

Published on October 10, 2017

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