Inflation has hit movement of goods, and therefore, Concor

State-owned Container Corporation of India Ltd, or Concor, is the largest player in the rail container segment. Anil K Gupta, its managing director, spoke to DNA on the company’s quarterly results, issues with domestic cargo traffic and the expected recovery trend in the exim market. Excerpts:

What is the outlook on the domestic and exim container cargo segments?
On the international side, we were expecting a good growth in volumes in the second quarter. The volume growth in the first quarter was around 7% and in the second quarter we were expecting it to be sustained or better it, but unfortunately that did not happen due to the oil spill incident in Mumbai. There was a big setback; there was an impact for almost four weeks. Many vessels bypassed the port and opted for Mundra and Pipavav. Clearance at these ports became an issue because these sections are single-lined sections. Thus, we did not get the expected volumes.

This month, the trend looks good, we must do good we are expecting to do 15% more volumes this month. Overall,we expect international volumes to grow at around 10%. The performance in domestic segment has been a little subdued due to certain fundamental changes like our leads going down. Leads in both the international and domestic traffic have reduced.

What is the reason for this?
Our substantially exim traffic used to be towards Ludhiana. That traffic is gone down mainly on account of scrap imports drying up. On the other hand, traffic on the shorter leads like Ahmedabad and Nagpur has gone up. However, as these are shorter leads that has not helped in improving the overall topline. For Ludhiana, the loss is of around 46,000 containers for the first six months of this year. Traffic in Nagpur and Sabarmati has compensated this but what I have made out of this is only `58 crores and thus the net loss is of Rs56 crores.

Hence, our topline has not grown. There has been an improvement in our bottom-line because we are exercising a very strict control on costs. Similarly, leads in domestic traffic have reduced as traffic on the Bangalore- Delhi route has reduced.

What are the main factors affecting traffic on these routes?
The reason for reduced movement or lead is the inflation situation in the country, which has resulted in certain fundamental changes in the flow of goods. The movement of goods like pulses, rubber and sugar between the north and south has gone down.

Is it also because recovery in container volumes has not been along expectations?
In the domestic segment, inflation is the main issue. However, in the international segment, recovery surely is a problem. Recovery has not been the way we expected it to be. We were expecting that in January - February we were out of the adverse affects of recession. But that has not happened. We are facing problems due to an imbalance in imports and exports. The recovery thus is less than expected. However, the trend has been good this month, hence the trend hereafter should be positive. That is the reason I am still talking of a 10% growth in exim cargo volumes.

Your results for this quarter are of a different pattern. Your exim sales are down, but margins in this segment have increased. On the other hand, your domestic sales are up, but the margins have reduced. How do you explain this?
Exim turnover has gone down because the average lead has gone down in spite of a growth in volumes. Domestic volumes have increased but margins have gone down as we could not pass on the January hike in haulage rates. The increase was of around 7%to10% but we could pass on only up to 5%. Overall for the year, we are expecting our topline to grow by around 5% to 7%.

Yet another hike in haulage rates is being mulled over for certain commodities in the domestic traffic segment. The Indian Railways has deferred the hike for this month, but how will it affect Concor if its brought into affect from November onwards?
Certain commodities are moved by the Indian Railways at higher rates on a rationale and state policy. Certain rail container operators started going to these clients that they will move these selected commodities at a lower rate. Thus, what is being proposed is a kind of correction to make sure this does not happen. While, implementing this correction, they have also included commodities that are not traditionally moved by the Indian Railways. Hence, we have started negotiations with the government and the government is ready to review and if the commodity is not moved by rail they are not expected to raise haulage rates for those.

In that case, is it that even if the haulage rates are increased Concor’s operations and tariffs will not be affected?
Concor is not moving any such commodity and hence it will not be affected. However, if this is extended to all other commodities like alloys and metals then Concor might also be affected, because these are not moved by the Indian Railways.

Looking at a larger picture, how have things changed with the entry of private players in the rail container business?
There are 15 private players who have made huge investments in this market totalling to one-third of the market. Four years back, there were expectations that a quarter of India’s total volumes moved by rail will go up to 35%to40% — has not happened. The moment this happens, everyone will grow. We will try and maintain our share at 70% to75% —- that is our wish. In fact, even after four years of the sector opening up to private players we still have a strong presence against popular perceptions.

What are your expansion plans?
Last year we had acquired 16 new rakes. Of this, we have received 4 rakes, while 12 more will come at the rate of two per month. We have plans to set up four-five facilities. Things are going good, we are going into land expansion and also looking at options in the logistics parks moving from just containerisation. Our planned capital expenditure for the current year is more `600 crore and we will spend much more than that.

Will this expansion policy also include looking at the private freight terminal (PFT) and special freight train operator (SFTO) schemes?
We wish to participate in the PFT plan. We are now in the process of acquiring land and looking at the existing terminals to be turned into private freight terminals. All regional managers have been given mandate to identify two locations each for this financial year. We have already approached the Indian railways for a couple of locations.

How about the SFTO scheme?
We have initiated discussions with various industries and we are looking at their requirement and looking at certain innovations and value additions that can be offered. That will take a little longer time to materialise.

You are also looking at tie-ups with shipping companies...
We have customers that want us to offer door-to-door services. So we are toying with this idea — we do not disappoint such customers. We are looking at a subsidiary or a joint venture with a shipping company. However, the shipping industry is not doing good right now, there are concerns and in such an event going for such a tie-up needs certain amount of rethinking.