LOGISTICALLY SPEAKING. Don’t derail container train operators

The Railways may have several reasons to justify its decision to hike haulage charges on private container trains by 25 per cent from December 5. However, such a steep increase at one go could be counter-productive for a variety of reasons.

One, private train operators, generally referred to as CTOs, may not be able to pass the entire burden on to their customers. This is because, they assert, the overall increase in haulage charges--the fee paid by them to the Railways for using its lines- works out to 27-41 per cent. In addition, there is a 10 per cent congestion surcharge on cargo originating from ports. Private operators fear they would lose cargo to road if they try to recover the additional levy from their customers. This is not in the long-term interest of the Railways as well as the country’s goods transport system.

For long-distance freight movement, rail is cheaper and more eco-friendly than road. However, the share of railways in the domestic freight movement is only about 30 per cent while road accounts for nearly 60 per cent. With diesel price coming down, trucks may attract more domestic cargo. In such a scenario, any move that will potentially increase the burden on road traffic is ill-advised.

Two, the main objectives of opening up the container train service to private sector participation, ending the monopoly the railways’ own subsidiary Concor, was to increase the rail’s share in the domestic freight traffic. So far it attracted 17 operators with investments exceeding Rs 5000 crore. After seven years, the container traffic has started picking up. It is time to attract more cargo than diverting them to roads.

Three, the Railways is a monopoly. In the absence of a regulator, hike in freight rates without consultation with stakeholders or prior notice could affect the viability of private freight services. The UPA government’s proposal to set up a regulator for fixing freight rates and passenger fares seems to have been put in cold storage by the new regime in New Delhi.

In the absence of an independent authority to look into the costs and revenues of both the railways and the train operators, at least mutual consultation before a rate hike could help sustain and advance better partnership, so essential for achieving the goal of private sector participation. Unilateral action can sore the partnership.

Four, for the Railways’ haulage charge could be just 4-5 per cent of its total revenue while for private operators it is the major cost (over 60 per cent). Currently the latter collectively own and operate 142 rakes. (Concor runs 276). Many have plans to acquire new rakes. Since additional wagon capacity is so crucial to the railways, any move to restrain them from making new investments is undesirable.

The Railways’ stand that the increase in haulage charge has come after two years and its operational cost in the meantime has gone up is understandable. But this is more to do with the legacy wherein the Railways has continued with the traditional model of freight cross-subsidising passenger fares. As everyone knows, passenger fares - particularly in the suburban rail service - have been kept unreasonably low to keep commuters happy; but actually commuters continue to suffer because of minimum comforts. A review in the working model is overdue to ensure improved passenger comfort, freight services and enhance the railways’ revenue.

And in the meantime, a review of the proposed hike in haulage charge with a view to reducing the burden on private container train operators is the least the Railways can do.