Private container train operators keen on new freight schemes  

June 8, 2010

The Indian Railways has introduced two new schemes for facilitating greater privatisation in freight movement. According to industry sources, existing container train operators are positive over the scheme, but want to be sure about the fine print

Last week, the Indian Railways announced the opening up of freight train and terminal operations to private firms. According to industry officials, existing container train operators will be interested in this offer. However, this time, companies wish to study the offer thoroughly first. Private operators had got a raw deal when rail containerisation was privatised earlier.

Under the new private freight terminal (PFT) and special freight train operator (SFTO) scheme, the ministry has allowed private firms to use the Indian Railway’s network for commodity transport and to develop freight terminals. Private players will be allowed to set up private freight terminals and also operate freight trains. The ministry plans to extend this to the existing registered container train operators and users having private sidings on private land.

“It is a good move for the existing container train operators. However, we need to see whether there is any extra cost involved as license (fees) to operate in the freight arena. We have been demanding that we be allowed to operate without any additional charge on the existing license,” said RC Dubey, president, Container Train Operators Association. The license fee under the SFTO scheme ranges between Rs5 crore and Rs15 crore depending on the commodity.

“We are still studying the proposal for both the schemes—PFT and SFTO. It seems to be quite reasonable. We will have to decide whether the rate at which the movement of goods would be offered will be reasonable, depending on factors like the cost of providing these specialised wagons. We are looking at this market and are also looking at acquisitions in this segment,” said Ajay Mittal, chairman and managing director, Arshiya International. The company is an existing private container train operator.

Mr Mittal declined to divulge further details on the planned acquisitions in the private container train operator (PCTO) segment. While Arshiya seems to be positive on the scheme, according to sources, other companies that could look at entering this segment are Hind Terminals, Innovative B2B, Boxtrans and Tribco.

Under the PFT policy, operators will be able to book and handle all traffic excluding outward coal, coke and iron-ore traffic. The revenue sharing for greenfield projects would start after five years of commissioning the terminal and after two years of commissioning a brownfield project. The revenue-sharing model would be 50% of the then prevailing rate of terminal charge leviable at goods sheds or Rs10 per tonne, whichever is higher. Revenue sharing will be annually increased by indexing it to whole price index (WPI) increase.   

Mr Mittal pointed out that some clarification is still awaited on the PFT. Clarity has been requested on whether container rail traffic policy will be in conjunction with the PFT policy.

The SFTO scheme offers a freight rebate of 12% for a period of 20 years till the recovery of investment, whichever is earlier. This could prove to be beneficial to private operators. It also addresses serious issues like empty return load, which would be exempted from freight charges by the Indian Railways. The private operator will be free to charge his customer freight and handling charges.

The SFTO will be operated for movement of goods like bulk fertilisers, cement, fly ash, chemicals, petrochemicals, steel, etc. A major concern with logistics companies is the fact that the automobile segment has not been included in the scheme. Inclusion of the auto sector was being considered earlier.

Mr Dubey also has his own apprehensions over the success of such schemes. “The scheme should not end up a failure like the once-proposed ‘own your wagon’ scheme,” explained Mr Dubey.

The ‘own your wagon’ scheme was introduced in 2005. The scheme focused on assured supply of a guaranteed number of rakes every month to a customer based on the number of rakes procured by him with freight concessions. Private firms faced turnaround problems due to congestion.

On the face of it, the new scheme looks favourable for private firms. They have some time to decide on an entry into this segment. Earlier, while container operations were being privatised, the license was operational only for a month.
— Amritha Pillay