Freight cargo moved by container rail operators is set to increase 16-fold over the next three years, says a report formulated by Infrastructure Development Finance Company (IDFC) in collaboration with SSKI Securities indicates.
At present, containerised rail movement is limited to a penetration of about 2 per cent in the overall freight market of three billion tonnes. With Container Corporation of India Ltd (Concor) and private operators set to increase capacity by nearly 60 per cent by 2011-12, containerised cargo being moved by rail will increase to 97 million tonnes from the present six million tonnes.
With this rise, says the document, nearly six per cent of cargo presently moved via road will shift to being transported by rail. To handle the projected additional business, container rail operators plan to add 185 rakes in the next three years.
Arshiya International, for instance, which has six rakes, has plans to scale up to 30 rakes over the next two years. Gateway Distriparks is inducting three rakes in the next two months. This will take the total number of rakes being operated by the company to 21. Concor, the market leader, having carried 2.3 million TEUs of containerised cargo last financial year, already has a fleet size of 218 rakes.
The report notes that the container rail business is capital-intensive and requires long gestation. “However, once a company achieves a level to attain economies of scale in terms of rail sidings and rakes, as also volumes, returns are typically quite high (and can be in excess of 15 per cent of capital employed).”
Container traffic in the country has grown at a compounded annual growth rate of 15 per cent since 1991, due to growth in external trade. Since Indian Railways opened the sector to private operators in 2005, 15 players, including Adani Logistics and Reliance Infrastructure, have entered the market. Blackstone Group recently invested Rs 300 crore in GDL to fund business expansion plans.
