Freight market braces for price war

With the government opening up rail container traffic to the private sector, the 14 new players are girding up for a price war to grab a substantial portion of a market dominated by the monopoly of the railways.

By conservative estimates, tariffs in the Rs 4,500 crore container freight industry are expected to fall by 10-20 per cent in two years. Private companies are hoping to grab over 50 per cent of the container traffic, eating into the share of the roadways and the railways.

Container traffic moves on rail as well as road. While public sector utility Container Corporation (Concor) has a monopoly in rail haulage with a 35 per cent overall share, the rest is controlled by roadways.

"Containerisation is growing at the rate of 15 per cent per annum. With the restrictions on loading by trucks and non-availability of frequent services via road, the private rail mode of transportation is set to corner 25 per cent of the total market and 50 per cent of the rail container market in a few years," said Prem Kishan Gupta, managing director of Gateway District Parks, one of the operators.

"Even if private container train operators can divert 10 per cent of road traffic, that will be enormous business for them," said Boxtrans Logistics Services President Sharat C Misra.

Others say prices will fall. "With so many players, tariffs should drop by 10 to 20 per cent in 2-3 years once we are up and running and acquire size. This will also divert a substantial chunk of container cargo from road to rail and the railways have given us full freedom to set rates," said an executive with a corporate house that got a licence to run container trains.

The railways have issued licences and signed model concession agreements with private players, including the Anil Ambani-controlled Reliance Infrastructure, Pipavav Rail Corporation and Sical Logistics, allowing them to operate box trains.

Private operators will, of course, take at least two years to procure the necessary infrastructure, including wagons and engines coupled with inland container depots.

"Once the private operators get rolling the price of transportation will come down and there will be better service options," said another private operator.

Private sector players expect to play on the quality of service. "The service quality of container train operations is set to improve. Private train operators will ensure reliability and proper information delivery. Service is going to be the differentiating factor in container freight movement by rail. Shippers actually do not mind paying more for better service," said Boxtrans' Misra.

Concor handles 35 per cent of the total containerised traffic, a mere 5 million twenty-foot containers.

"This will grow to 20 million twenty-foot containers in the next 5-6 years. The private companies will capture 50 per cent of that growth," said Misra.

More competition

Tariffs in the Rs 4,500-crore container freight industry are expected to fall by 10-20 per cent in two years

Private companies hope to grab over 50% of the traffic

But private operators will take at least two years to procure the necessary infrastructure