Financial Daily from THE HINDU group of publications
Monday, Feb 20, 2006
Logistics - Insight
Columns - On the move
Railways performance What lies beneath the numbers
In the advertisement, the Railways publishes its own figures and compares them with those of the Container Corporation of India (Concor), a railway subsidiary, and the road sector to prove how cost-effective rail transportation is. Thus, on the Mumbai-Delhi route, according to the advertisement, the cost of transporting a container is Rs 450, compared to Rs 825 for Concor and Rs 2,000 for the road sector.
Similar figures have also been quoted for the Delhi-Vizag and Delhi-Chennai routes.
The figures throw up a few questions. Since when did the Railways start using its own containers? It does not have any container of its own. If the situation so demands, it uses the boxes supplied by Concor. When Concor, by the Railways' own statement, charges as high as Rs 825 per container for transportation on the Mumbai-Delhi route, how can the Railways, borrowing the same containers from the Concor, hope to charge a much lower freight for the same route?
Since the published figures of the Ministry are not to be challenged, the Railways must have devised some unique method to arrive at such cost estimates. The calculations are not clear to many.
More important, what the advertisement does not explain is that Railway freight is only the haulage charge the cost of transportation between two stations whereas the Concor's rate is inclusive of haulage and various other charges incurred for handling the containers. The road transportation cost is still higher because, unlike rail transportation, it is a door-to-door service and, therefore, covers all charges, and not merely that between two points, as in the Railways.
There is no denying that the performance of the Railways in the past few years has been impressive. The freight traffic this fiscal, it is estimated, might be around 660-670 million tonnes, compared to 602 mt in 2004-05. What is particularly significant is that such a jump will be achieved without any significant addition to the rolling stock, particularly wagon stock.
If anything, there is a shortage of wagons and the Railways thus deserves kudos for handling its freight operations ably.
It is, of course, another matter why the wagon shortage persists and why, despite the Railways' best intentions, the wagon incentive scheme is yet to take off. The extent of wagon shortage is shown in the Table.
Judging by the kind of response it has received so far, the wagon incentive scheme is not user-friendly. According to many, the scheme may be useful for long lead traffic with higher classification but not for short lead traffic with lower classification. What happens if the Railways fails to provide the agreed number of rakes? Is there any penalty for such a lapse?
It must also be remembered that the surge in traffic throughput in the Railways has been caused mainly by the buoyancy of the economy and, instead of augmenting its capacity which is not possible in the short-run the Railways opted for some smart measures to take advantage of the situation. One such measure has been reducing the free time for loading and unloading of wagons at the users' premises and slapping higher charges for detention. Strictly enforced, such a measures helps achieve higher turnaround of wagons. As a result, more traffic could be handled by the same number of wagons.
Another important step has been permitting loading in excess of the carrying capacity (CC) of the wagons, with schemes such as CC plus 6, CC plus eight. Thus, the loadability of the wagons has been increased without increasing the number of wagons. The essence of the schemes is that the wagons are overloaded to a certain extent, depending on the type of cargo handled by six tonnes in the case of CC plus 6, and by eight tonnes in the CC plus eight scheme.
Reports have it that the Railways is set to post record revenue earnings this fiscal with the result that the operating ratio will be much better than estimated.
One of the reasons for the improvement in earnings is believed to be the change in classification of certain items.
For example, iron ore and a few other raw materials for steel plants have been put on a higher classification of 160, compared to the earlier 120.
As a result, the freight earnings from transportation of the raw materials for steel plants jumped by 33 per cent. It might be noted that the Railway Minister, in his Budget announcement, had stated that the freight for iron ore for the integrated steel plants offering programmed traffic would be as per the 140 classification, whereas for others would be 160.
However, one-and-a-half months after this announcement, the integrated steel plants were made to pay as per the 160 classification.
With only a few days to go before the presentation of the Railway Budget for 2006-07, reports doing the rounds suggest that the Railway Minister will not only desist from a hike in passenger fares, he may even offer passengers a set of new goodies.
Which means, the goods transport sector will continue to be the milch cow. As long as the economy is booming, he may get away with the proposals for further taxing the freight sector.
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