The Hindu Business Line : Concor facing a wagon crunch — Trade wants more players to be allowed to run container trains

Despite new rakes being inducted Concor faces a severe shortage of wagons, but says that is not the sole factor causing the pile-up of containers in various ports.

AS India's container traffic booms, the export-import (Exim) trade is making out a case for allowing more players to run container trains given the acute shortage of wagons faced by the state-owned Container Corporation of India Ltd (Concor), which currently enjoys a monopoly over rail haulage of boxes to and from the ports.

With the container traffic registering a growth of 20 per cent last fiscal from 3.3 million TEUs in 2002-03 to 3.9 million TEUs in 2003-04, the trade says that boxes have been piling up at the gateway Jawaharlal Nehru Port due to wagon shortages in the face of growing demand.

For instance, the evacuation of container cargo to and from North India, which contributes close to 30 per cent of the containerised Exim traffic moving from gateway ports, is dependent on rail connectivity. "Rail connectivity today means only Concor as there is no clear Government policy on private sector participation in this sector. Concor, however, is unable to provide the basic infrastructural asset needed to carry the traffic due to extreme shortage of wagons", trade sources told Business Line.

According to trade, Concor has made a fresh induction of only five rakes in the last six months despite assurances of two to three rakes a month.

"The result of the wagon shortage in the face of growing demand has been the increase in pendencies building up at the ports", the sources said. In order to decongest JNPT, which is heavily patronised by exporters and importers from North India, the trade has suggested diversion of some of the traffic to alternative gateway ports based on directional and cost advantages and the basic need to find alternate exit and entry points for cargo. However, in this regard, the wagon shortage situation has become a constraint.

The sources said that there was a waiting time of over a week for containers at Concor's flagship ICD at Tughlakhabad near Delhi before they move out of the terminal. The wagon shortage ensures that there are less train services than demand for all directions whether it is the new services to ports such as Mundra, Chennai, Vizag or even for existing flows to Mumbai/JN Ports.

The physical barrier to movement of cargo is a major hurdle impeding the growth of trade. "Without the means for actual movement of cargo, nothing can move. More wagons are the need of the hour," the sources point out.

Concor's past acquisition record does not convince the trade about the former's ability to keep pace with the demand.

"Having built up a fleet of 3,000 high speed wagons over the past five years, it is difficult to accept the assurances that the requirement of an additional 2,000 wagons can be met within the next 18 months. There is a need to invite additional players in this area not only to enhance capacity but also to reduce costs and improve efficiency for the benefit of Exim trade," the sources said. The private sector would be in a better position to acquire wagons faster as they are not bound by the time consuming processes associated with purchase of wagons by Indian Railways/Concor.Competition will not only add to capacity to carry greater volumes in the sector, it may also lead to a reduction in some of the "huge margins" ranging from 36 to 39 per cent currently being recovered by the monopoly serviced provider. Concor has to pay freight charges annually to the Railway Ministry for haulage of containers on the basis of a flat rate per TEU per km.

For Exim traffic, the existing rate is Rs 6.70/TEU/km for loaded containers and Rs 5.70/TEU/km for empty containers. This rate is applicable when the movement is done on Concor-owned wagons. Currently, the entire Exim traffic moved by Concor on the JN Port, Mundra and Pipavav sectors are hauled on their own wagons. As per one estimate, the difference between what is paid by Concor to Indian Railways as freight charges and what is recovered from the final customer is almost Rs 3.80/TEU/km.

"Even after accounting for some element for Concor's cost of capital in terms of providing wagons and overhead costs, a difference between cost and tariff of at least Rs 2/TEU/km would remain. There is thus a great potential for cost reduction to the tune of Rs 2,500-3,000 on the Delhi-JN Port/Mundra/Pipavav corridors alone", the sources said adding that it was this cost differential that is causing the inland haulage costs to be high in India.

Concor admits shortage, says it is not solely responsible

Conceding that its wagon capacity was insufficient to meet the huge demand, Concor, however, said that it should not be solely held responsible for the situation."There is tremendous demand for movement of containers and we do not have enough wagons to meet the demand", a Concor official said adding that the pendency of boxes at the ports is not only dependent on wagons but also on the efficiency of ports. If ports release wagons faster, the turn-around time is faster and the utilisation of wagons is faster. But if the wagons are detained for long, the utilisation also goes down.

The problem of box pendencies starts from the ports itself. "If the ports cannot release the trains in time, Concor can't do much", the official said. Though it has inducted 455 wagons during the last fiscal (April 03 to March 04) to meet the demand, Concor says that India should have additional container handling berths to cater to the growing volumes given the capacity constraints facing the Nhava Sheva terminal, in particular. "You have to have additional berths. Otherwise, you cannot reduce pendency", the official remarked.

Refuting allegations that it was charging astronomical rates from the customers for inland haulage of containers, the official said the problem primarily had its roots in the huge freight charges annually levied by the Railways from Concor.

"The freight charge levied by Indian Railways on Concor has increased every year. The quantum of increase has varied from as high as 13 per cent to as low as 0.5 per cent. We even have to pay freight charges to the Railways for hauling empty containers, the rate for which is about 80 per cent of the rates for carrying loaded containers", the official remarked.

When the trade says that Concor is making huge margins, they are not factoring in many other costs which we incur apart from the charges being paid to Indian Railways while arriving at a tariff for box movements.

For example, Concor has to pay Railways a license fee/royalty of Rs 200 for each container handled at its terminal, which are built on railway land.

Besides, there are costs associated with procurement of wagons, its maintenance and depreciation, insurance and salary for the customs staff posted at the terminals.

"Like this, there are so many other costs which Concor incurs while providing service to its customers. Where will I recover that from? My margin cannot be that high (36-39 per cent) as is made out by the trade", the official stated.The Railways charge Concor on the basis of cost plus a percentage of profit and when there is a rise in cost due to inflation, among other things, they simply pass it on to Concor. But Concor is not in a position to pass it on to the customers, due to fear of losing traffic to roads, its main rival.

Concor says that it has been benc marking its tariff lower than roads, the traditional mode for inland movement of container cargo, to lure traffic away from the roads. "Otherwise, where do I get the traffic from? Traditionally all cargoes move by road and Concor has been in existence only for the last 15 years. Currently, more than 50 per cent of the containerisable cargo moves by road. If I price myself above road, nobody will come to me", the official stated.

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