With the railways raising haulage charges, all container traffic operators, including public sector Container Corporation of India (Concor), are complaining. Though private container train operators have not been able to make much of an impact in the Rs 6,500-crore market, esssentially due to lack of infrastructure, the biggest player is planning further expansion. Concor Managing Director Anil Kumar Gupta discusses the company’s outlook with Disha Kanwar. Edited excerpts:
What kind of investment are you planning in FY13?
We have ambitious plans of spending Rs 1,600 crore during the year. It will be primarily for some new Private Freight Terminal facilities that we have been planning. Among other things, we will be spending money for land acquisition, terminal development and wagon and container acquisition. We plan to induct around 30 rakes and also import some Rubber Terminal Gantry Cranes.
Has the increase in haulage charges by the railways impacted your competitiveness with respect to roads?
We are awaiting clarifications from the Railway Board. If there is no change, Concor would be losing 15- 20 per cent of its domestic business in volume terms. We carry 25 per cent of notified commodities and 75 per cent of FAK (Freight All Kind Commodities).
The rates for movement of notified commodities (cement, bricks and stones, iron and steel, alumina, petroleum products and gases, pig iron and sponge iron) are now quite high. In some of the commodities, we straightaway go out of the market after we add our costs. For us, the relevant items of costs are the rail haulage charge, wagon costs, container costs and the empty repositioning costs. To these we need to add the first mile and last mile costs, considerably high as compared to first/last mile costs for moving break-bulk cargoes. Once we add all these costs, plus the service tax liability, which is already there for container handling and movement by rail (unlike railway wagons, where it is not yet enforced), then we become very uncompetitive. Universally, rail movements are not competitive below 300 km. In our case, even beyond 300 km, we are competitive only if we get both-way loaded traffic. If we can’t match both ways, then we have to add empty repositioning costs which makes us totally uncompetitive.
There are some streams where we are taking FAK rate commodities (all commodities, except notified ones and iron ore and coal) in one direction and bringing back notified commodities in the return direction. If the notified commodities’ rates become very high and we lose these, then empties will have to be brought in the return direction, which will also affect the viability of moving non-notified (FAK rate) commodities. For instance, what we take from northern to eastern India comes back to the north laden with mostly notified commodities. So, if we have 75 per cent FAK and 25 per cent notified, it does not mean that we are hit in 25 per cent of the segment and in 75 per centof the segment we are safe.
How do you react to the railways’ point that the 14 CTOs, including Concor, have not been able to crack the domestic market as was expected. The business model of everyone is primarily EXIM-based.
As I understand, the railways expect all CTOs to concentrate on moving piecemeal traffic through aggregation. This is the traffic that the railways had given up voluntarily during the early 90s, so that they could improve wagon turnaround by concentrating on block rake traffic. The railways expect CTOs to carry this traffic in containers which should be aggregated at the terminals and offered to them movement as block rakes only. According to me, such piecemeal traffic can be captured from some places/hubs where a lot of traffic of different kinds comes from different hubs and then we are able to move to the second location. Concor has been able to aggregate such piecemeal traffic for movement between some centres like Delhi, Chennai, Bangalore, Secundarabad and Kolkata successfully.
For other places, it has not been possible. For these, one requires a hub and spoke policy, which has now been announced again by the railways. This should help, especially for CTOs who have the terminals. If you are talking about operations from CRTs (container rail terminals), which is the main thing from which domestic traffic is moving today, then you can’t talk about aggregation. If you talk about aggregation, there are only a few places where this is possible. At other places, 90 containers in a short span can’t be aggregated, as there is hardly any traffic.
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Are you saying the railways' expectations about you cracking the domestic market are not pragmatic?
I would not say that but I think there is some mismatch somewhere.
The railways expect CTOs to move piecemeal traffic in high-rated commodities but the cost structure is not viable. The total door to door costs, inclusive of first and last mile costs, for CTOs are high. There is no solution that Concor or any other operator has been able to find up to now.
What have been the recent developments for Concor in the air cargo business?
We recently inaugurated our air freight station in Mulund, Mumbai, where we have an ICD (inland container depot) there. We are also making an AFS in Khodiyaar, Ahmedabad, to be on stream very soon. We want to go big, as we have the infrastructure. There are delays at the airports and we would like to capture that cargo at our place, so that it can go in the form of bonded trucks.
After the arrival of private CTOs, has Concor become more efficient?
Where is the choice? If one has to survive in the market, one has to be efficient. Our people are doing very hard work. Earlier, there was a high attrition rate. During the past four years, we have put great emphasis on training. We have around 1,150 people and we train almost 650 people every year in different subjects. A common subject is customer relations. There is a visible change in the attitudes of our staff.
Private CTOs say charges for using your terminals are very high.
We allow them but on certain conditions. We don’t charge more, but we do take into account the capital cost we had incurred on building that terminal. For example, we spent around Rs 160 crore in building the Dadri terminal. We definitely need to retrieve our capital costs. We are already having an element of that in our own costs. Shouldn't we be recovering these from other users? In any case, I don't think that cost is an issue. There are players/CTOs like DP World, DARCL or Adani who are already working with us at some of our terminals.
What is your sense of the market in FY13?
We are still hoping for 10-plus per cent plus in EXIM traffic. If seven per cent is the GDP growth, then1.4 times should be the transport demand. We are still keeping our fingers crossed. In domestic cargo, there are lots of issues.
How does the Indian container business compare with global experience? Have ambiguities in policy been sorted?
I think these problems are peculiar to India. From my knowledge, I have not seen much domestic traffic moving by containers, except in the US, where the economics of moving is different. In Europe, it is primarily EXIM traffic that moves by containers, on a door to door basis. They use swop bodies for domestic cargo movements. These are bodies which are very long, up to 54 ft long, with large volume capacities.