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Indian Railways chalks new plans, but with great ‘goals’ comes great ‘demands’

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Since the recent past, Railways has been taking pricing decisions through the year, instead of waiting for the annual budget to be released. This year as well, the goal has been set – to increase the contribution of rail in the transportation of domestic cargo to over 40% by the year 2030, as compared to the current share of 28% – considering that freight movement amounts to two-thirds of the Railways’ revenue and even more post-COVID-19. But as the Annual Budget closes in, Indian Railways may be walking on a tight rope as the domestic cargo industry has put forth its demands.

There has been a line-up of expectations from the Railways on behalf of its customers, including commodity players, and adding on to it are the Railways’ equipment vendors who want the transporter to factor in soaring prices of raw materials while formulating/amending policies.

A critical demand made is in reference to simplification of the Railways’ price regime. The transport team of the Confederation of Indian Industry (CII) suggests that targeted policies should be introduced if the Railways aspires to garner a greater share in multi-modal/domestic freight transportation.

Railways need to bring in pricing based on direction, instead of linking the freight rates to weight and distance. There is a huge cargo demand in certain directions, and less demand in others. Railways should consider lowering prices in directions where there is less demand.”

~ Sachin Bhanushali, CII National Railway (Transport) Committee

As of now, the formula to calculate the rate of transhipment is quite complicated and includes various weights, distances, commodities etc. which discourages service providers to come up with new business models that can include the movement of new cargo via rail.

We have requested railways to provide a simpler rate formula, where they charge us per train. Then, it is up to us to decide how much rice or how much cement we carry in each train.”

~ Manish Puri, Association of Container Train Operators (ACTO)

Drawing a parallel, the suppliers of Rail equipment are also hoping for measures to help combat hyper-inflation by re-negotiating contracts & price escalation formulas and amending rules for penalties & refunds. Rail equipment, engine and coach makers including Wabtec also expect the government to adequately fund the projects it has already announced.

If the investments follow the National Rail Plan (NRP) 2030, then we believe that the rail eco-system will thrive. It will be critical to continue with the announced strategies and avoid re-visiting strategies often”

~ Sujatha Narayan, Wabtec India

Another demand put forth by the private players of the domestic container market is the diversification of freight routes covered by the Indian Railways. According to them, the need of the hour is to expand from traditional freight routes to more contemporary ones, if they are to trust the transporter with more and varied goods. Currently, container transportation (carrying a motley of cargo) makes up for only 5% of the total freight carried by the Railways, while more than 50% share is occupied by coal & iron ore, and the rest comprises bulk cargo in wagons (not containers).

“If Railways is seriously eyeing domestic container cargo that will essentially ferry smaller chunks of industrial finished goods or consumer goods, offering more location choices to load and unload cargo becomes extremely important. That’s because these goods move from multiple origin points to multiple destinations. It is fundamentally different from handling bulk commodities, which are railways’ forte and that usually run on set traditional routes,” according to Bhanushali.

The private players have also pointed out the need for Railways to guarantee the assured time in which the container/goods train would cover its route, for all routes and not just a limited number as it is at present. Such guarantees for import cargo and domestic routes will help container train operators to plan better utilization of their assets.

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