Railway Budget 2012: Upcoming freight corridor to provide 20% tariff concession

NEW DELHI: Railways will offer tariff concession of about 20% on its planned freight corridor to compete better with the trucking sector, a senior official of the project execution company said.

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The freight corridor, a Rs 85,000-crore project being implemented by the railways through the Dedicated Freight Corridor Corp of India Ltd (DFC) to connect northern and eastern India, will be used for moving only cargo. It is expected to cut transportation time by about a third and reduce congestion on the railways’ overburdened network.

“We may capture a part of the lost freight share, as our tariff will be about 20% lower than the current charges,” the DFC official said on condition of anonymity.

In India, moving cargo by rail is cheaper than by road, despite the railways raising freight charges twice in the past one year. However, improvement in roads and highways has seen truckers drive down the railways’ share of the business from 70% to 30% in the last three decades by offering a quicker alternative to a system plagued by delays and capacity constraints.

Helping the trucking sector is improvement in roads and highways, as the government pumps more money into infrastructure to aid economic growth.

The two-part, 3,300 km freight corridor, connecting Dankuni with Ludhiana and Jwahar Lal Nehru Port with Dadri near Delhi will have 10,000-tonne capacity cargo trains moving at a maximum speed of 100 km/hr. Each train will carry freight equal to 300 trucks and twice that of the wagon trains that railways currently uses.

A lower tariff structure will also lower costs for companies that supply commodities such as food grains, fertilisers, iron ore, coal, petroleum oil and lubricants and cement.

Coal accounted for more than 40% of the total freight movement by rail in 2010-11. Coal India, the country’s largest coal producer, transported 234 million tonne of coal last fiscal, and the number is expected to cross 250 million tonne in this year.

Coal India said in an email reply that an about 35% of the country’s coal demand by 2016-17 would pass through the eastern corridor, of which the company alone would account for about 200mt. It also said that railways needs to develop feeder routes in coalfields and make wagons available during peak production season from November to March to reduce delays.

Abhaya Agarwal, executive director and PPP leader at Ernst and Young, said, “With commissioning of DFC, the coal movement from east and central India to north will get more fast and efficient.”

Agarwal added that with infrastructure development progressing at a break-neck pace and large capacity expansions being implemented in the cement and steel sectors, railways has huge potential to increase share of cement and steel traffic by aggressive marketing and efficient services.

Containerised Exim traffic will be the principal traffic stream on the western DFC route. In 2007-08, the level of containerisation of general traffic was about 50% and the railways’ share in containers handled at ports in the region was a mere 25%.

The western line will not only generate additional capacity, but also increase throughput per train through double-stack container train operation and enable DFC to offer scheduled freight services between the ports and logistics terminals in northern India.