Container rail to see Rs 10,000 cr investment

Due to privatisation of container rail operations, India is likely to witness an investment of over Rs 10,000 crore in the next three years, primarily in procurement of wagons and setting up of inland container depots (ICDs).

Ending the monopoly of Container Corporation of India (CONCOR), the Indian Railways have issued licences to 14 players for running container trains in the first round.

Typically, a company must have at least seven container trains to service a main route such as Delhi-Mumbai or Delhi-Gujarat and two to three ICDs.

"The average cost of acquiring a container train is estimated at Rs 15 crore, while setting up of an ICD will cost around Rs 100 crore. Taking into account seven trains and two ICDs, the investment of a company in running a single route service would be Rs 300-350 crore," industry analysts said.

A new company that is not into shipping or logistics would have to invest heavily on setting up of ICDs and procurement of container handling equipment, they added.

"Companies such as Central Warehousing or Gateway Distriparks can use their existing infrastructure like Container Freight Stations (CFS) or ICDs," said a representative of a leading logistics company.

Why are players queuing up for licence? Well, India's container traffic has grown at 14 per cent per annum in the past 6-7 years, which is higher than the growth in global container traffic.

A report released by Edelweiss Securities has pointed out that the country's growing external trade, particularly in textile, automotive, auto ancillary, engineering, and capital goods, has boosted containerisation in India.

"Transportation of containers by road has become expensive with the hike in diesel prices and the recent ban on overloading. Rail transportation is cheaper by 15-20 per cent," it said.

"While players such as Mukesh Ambani, the Birlas and Pantaloon are opting for this business (they have applied for licence in the second round of container freight privatisation) to supplement their retail operations, others are eyeing its huge potential," analysts said.

Apollo International Chief Executive Officer (Logistics) Capt Kapil Anand said players not into shipping might forge an alliance with the existing players. "This will help avoid huge investment in the initial phase," he said.

Gateway Distriparks has already tied up with CONCOR to use the latter's infrastructure to run container trains from its CFS near Garhi Harsaru.

"We are currently running trains partially filled by CONCOR. We will soon start operating full trains," Prem Kishan Gupta, its deputy chairman and managing director, said.

Bothra Shipping has imported container trains and is ready to operate. JM Baxi-promoted Boxtrans Logistics and APL Logistics, which has tied up with Rajeev Chandrasekhar's venture, will have their trains in the next three months.

Pipavav Rail Corporation, already running trains, plans to operate five lakh containers annually within three years.

Anil Ambani's Reliance Infrastructure Engineering Pvt Ltd (RIEL) will be setting up ICDs soon, besides acquiring wagons.