Container rail terminals see a glimmer of hope

Container train operators are witnessing flat growth in volumes due to a slowdown of the economy and this has hampered the growth of rail freight sector. However, with privatisation, investment in technology, the establishment of terminals in the NCR region and the government’s intervention, the operators are optimistic of volumes picking up over the next one year. Jasleen Kaur finds out.

The economic slowdown in India has impacted the country’s freight transportation. During April-September this fiscal, exports grew by 5.14 percent to $152.1 billion while imports declined by 1.8 percent to $232.23 billion. The trade deficit for the six-month period was $80.1 billion. A clear impact of this can be seen in the rail freight traffic which has recorded low volumes.

Indian Railways’ share in cargo traffic is expected to go down by 2-3 percent in 2014 against the current 36 percent. This is in sharp contrast to the two percent increase targeted for the 12th Plan period. The key reason for this has been the lacklustre performance of the Railways in setting up dedicated lines and centres for expanding business in commodities like steel and cement.

India is the fourth largest producer of steel in the world. The Railways, even with the current growth of loading rate at 8.39 percent, carry less than half of the steel produced, about 40 million tonnes compared to the overall production of 96 million tonnes annually. India’s steel capacity will treble in the coming years but the Railways seem to be little prepared for the challenge.

Among the steel producers, only Steel Authority of India (SAIL) uses the Railways for transportation. Other major private players have switched to roads because of issues like cost, service, and connectivity. A senior official from the Planning Commission said there was an urgent need to capture the traffic on the Western Coast.

In the case of cement, the Railways’ carrying capacity grew by about 1.84 percent, while the overall cement demand grew by about 8.2 percent in 2013, according to a report by ICRA. Last year, the railway loading fell by 1.63 percent. There has been little progress on the construction of new lines that are part of the 10 identified big cement clusters in Nandyal-Yerraguntla, Jaggayyapet-Mallacheruvu and Vishnupuram-Janpahad.

Besides, the Railways has also missed the opportunity to tap automobile traffic. Automobile forms less than one percent of the Railway traffic. “Each year, the Railways announces a policy revision for automobile traffic. It hopes for better performance. But, the policy, for its inherent flaws, has never succeeded

Container train terminal is a facility which usually provides storage facilities for both loaded and empty containers. Loaded containers are stored for relatively short periods, whilst waiting for onward transportation, whereas unloaded containers may be stored for longer periods awaiting their next use. Prem Kishan Gupta, Chairman and MD, Gateway Rail Freight mentions, “At present, the transportation of containers through rail is about 20-25 percent of the total EXIM traffic, and approximately five percent of the overall rail traffic in the country, which is inclusive of all domestic rail business. Therefore, there is an adverse impact of trade deficit on the rail containerisation business.”

Manish Puri, Managing Director, APL IndiaLinx, has estimated that about 18 percent of EXIM containers move by rail in India. While the port, throughput in India, has grown at a CAGR of 16 percent during the last five years, growth in rail-borne container transportation has lagged behind. As a result rail share, which used to be about 23 percent five years ago, has dropped to 18 percent currently.

Vivek Sharma, Chief Operating Officer, Adani Logistics is of the opinion that the share of EXIM transportation of containers by rail is 25 percent. The major drop is at Nhava Sheva where the rail share has fallen from 28-29 percent four years ago to 22 percent presently.

Though the sector has been facing downturn due to economic slowdown and trade deficit, infrastructure trends have taken off in a big way. Privatisation has been a welcome step which has brought in lot of investment with technology upgradation. The establishment of terminals in the NCR region is also the latest trend.

Not many private container train terminals have come up since the operations were thrown open to private operators, believes Sharma. “There are many reasons for this slow growth and some of this can be attributed to issues relating to land aggregation, acquisition and CLU procedures. Then there is the whole other issue of business feasibility. There is hardly any new container train terminaPuri considers container terminals in NCR as the major trend in terms of infrastructure. “At least two of these terminals have started running double stack trains on a regular basis. Regular double stack train operation from NCR, we feel, has been the most significant development in recent times. Besides NCR, 5-6 new terminals have come up outside NCR also.” Developed infrastructure coupled with the proper utilisation of information technology is the need of the hour for the development of container terminals. Technology provides an add-on to the service and smoothens the whole process. Echoing similar thoughts, Gupta says, “Industry has started to realize the importance of operational efficiency in improving business profitability, therefore, technology now-a-days plays an even bigger role. As a result, one can see the use of radio-frequency identification (RFID), warehouse management systems, yard management systems, vehicle tracking systems, etc., as an integral part of the terminal infrastructure.”

Puri said that the sector which has grown the most in the last five years is NCR-Mundra, while Sharma says, “In absolute terms, there is some growth in container train movement in EXIM sector, although relatively this sector is also shrinking (in percentage terms). Domestic sector is actually showing a negative growth in container train movement. This shrinkage of market share and/or decline can be attributed to competitiveness of the rail sector v/s road sector, especially for light cargoes.”

Development of the supporting infrastructure in terms of rail connectivity acts as an impetus and a catalyst to a superior port performance. Evacuation of cargo from the port and movement to the port areas have to be properly synchronized so that the inter-modal network functions smoothly. Therefore, connectivity has to be established within a well-defined time frame. The Committee of Secretaries, Government of India, has also recommended that double line rail connectivity must be provided for major ports. A lot of issues are still prevalent for which some attention to improvement is required. Puri is of the opinion that rail transit time to the new ports such as Mundra, Pipavav and Vizag is still an issue but that is getting addressed.

“One of the major challenges of maintaining proper rail connectivity between ports and ICDs has been the acute imbalance of traffic between import and export volumes. The imbalance has eroded profitability of the train operators significantly. Immediately, we look forward to complete EDI connectivity covering ports, ICDs and the users of both,” Puri adds.

The veteran from Gateway Rail Freight echoes similar concerns. “While the connectivity from terminals to ports is constantly improving, there is still a lot of scope for improvement. For instance, some rail network sections are single track and non-electrified, wherein the track structure is unable to carry freight trains at a high speed, alongside, there are at times, issues of congestion in the network and locomotive unavailability. There is also a shortage of qualified engine drivers in certain sections.”

With private investment, the rail connectivity to non-major ports has been achieved. “Capacity augmentation is an ongoing requirement to/from all ports and terminals. Rail network in certain sectors is very congested. Take for example, the JNPT-NCR corridor or within NCR, both sectors are working beyond optimal capacity. These issues will probably be resolved when DFC is operational, which is a few years away.”

However, the question is will the rail freight industry stand to gain when all the infrastructure and connectivity barriers are removed? The Indian Railways projects to handle container traffic of 210 mt by 2020; however this can only be possible by removing existing constraints.

“Containerisation is currently at 50 percent in India, which is way below that of 70-80 percent in developed countries, so we still have a long way to go,” informs Gupta. “The benefits of rail transportation will be tremendous and for some segments in particular, like auto logistics, there would be no alternative but to look for rail-based solutions, due to the enormous growth forecasted. Having said that, there is a positive outlook among customers towards rail, and they have started to experiment, mainly due to the advantages offered by rail vis-à-vis road,” he added.

According to Puri, removing infrastructural bottlenecks and connectivity constraints is a time-consuming task. “The projects involve considerable investment of capital (As Indian Railways’ Vision 2020 says) and large scale deployment of technical and managerial talent. Further, it is a never-ending process since demand on the infrastructure is continuously increasing in a fast growing economy. Given the resource constraints that we face today, it would be too optimistic to project that we would be able to catch up with the best in the world in the next five years.”

Sharma emphasises that rail is and will remain a preferred mode of transport over long distances. He believes that if the connectivity barriers are removed by adequate capacity augmentation and the pricing strategy promotes rail transport then this sector will flourish. However, India still has some way to go before it can match up to the freight transportation industry in developed nations.