Cost, time are crucial to make railways viable to carry automotive, say experts

Last week, Southern Railway came out with a Vision Document which set a target of Rs 500-crore revenues over the next 10 years from the automotive sector. The first of its kind document has come out with various initiatives and schemes. But with the huge gap between road and train freight rates, lack of infrastructure, lack of rakes, the question is whether it is achievable?

Ajeet Saxena, chief commercial officer, Southern Railway, said the Division is working on bringing down costs to attract automotive cargoes.

Currently, to send a car by truck it costs around Rs 1000 per car, by train it will go up to Rs 1500 a car. Southern Railway has signed MoUs with Chennai and Kamarajar Ports to bring down costs. The Division claims this is a first of its kind in the country.

 

Without getting into any specifics, officials said ports have agreed to bring down the cost in wharfage and handling charges which will bring the cost close to road transport.

The official said they have also written to the Railway Board to reduce freight to become more competitive.

V Anand, manager, Hyundai Motor India, which sends 6% of its traffic through trains, said that in India there are three major auto clusters including Northern - Delhi, Guragon and Faridabad; Western - Mumbai, Pune, Nasik, Aurangabad and Sanand and Southern cluster consists of Chennai, Hosur and Bangalore.

The South has got huge potential, considering major OEMs have their manufacturing base there. Today, sending the produced from South to West is not feasible.

For instance, the road freight from Chennai to Pune is around Rs 7,000 (door to door), where as total rail freight comes to Rs 11,700, nearly 67% higher. For Mumbai, while road freight is around Rs 9,500, by train it is nearly 38% more. To Sanand, road freight is about Rs 12,500, while by rail it is Rs 15,256, higher by 22%.

Cost is a major challenge. Additionally, there is also lack of dedicated freight corridors, absence of loading and unloading infrastructure, absence of connectivity to manufacturing clusters, complicated structure of freight rates without alignment to market dynamics and fuel price.

The limited availability of rakes and slow speed are some of the key reasons that have restricted growth of freight movement through railways. Also, private auto terminals are too expensive under the auto hub policy.

Ashish Bhat, general manager (operations), APL Logistics, which is one of the two companies that are operating dedicated trains to cater to the automobile industry said that rail coefficient is 70% in the US, 35% in Europe, while in India it is only 3.1%.

Automobile distribution across India cannot be met by road alone.

For OEMs, number one is cost, quality and delivery.

Today, transporting through trains is costlier. The other major issue is transit time. By truck, it takes around 96 hours from Chennai to Delhi, whereas by train it is 100-120 hours.

Besides, there is a penalty of minimum Rs 150 per day of late delivery per vehicle. There are 20 additional activities if a vehicle is transported through rail.