Operators innovate as rail container volumes decline

With export-import sliding on the back of the global economic slowdown, India’s container rail trade is now feeling the heat. The impact, in form of lower volumes, was already felt in the September quarter. And more pain is expected in the second half of this fiscal.

In the April-September 2008 quarter, container traffic growth was at 10.2% against the annual average growth rate of 14.4% between 1994 and 2008. Experts feel this growth rate will fall almost 5% year-on-year. However, negative growth is not expected.

As export-import (exim) business slows, rail container operators are now focussing on domestic movements to avoid losses. Sachin Bhanushali, president, Gateway Rail, which has 25% of its rakes on exim routes, said the company has seen a drop of 10% in exim volumes. “We have deployed the capacity released from exim business on our domestic routes so the rakes don’t lie idle.” Gateway Rail, a subsidiary of Gateway Distriparks Ltd, runs 12 trains and is in the process of inducting another six. 

Traditionally, domestic container movement has been via roads. Though expensive, roads offer the last-mile connectivity, which the rail route can’t. Rail operators too were focussing on the exim segment.

However, rail transportation is expected to gain traction in the domestic market, with 15 private operators and the country’s largest container rail operator, the Container Corporation of India (Concor) increasing their services.

Ajay Mittal, chairman and MD of global logistics solution provider Arshiya International, feels that operators are realising that the domestic segment is lucrative. Even the state-owned Concor, which has 80% of the market share, has increased focus on this segment. 

P Alli Rani, executive director (finance), Concor, said, “We have used different market strategies and tie-ups to increase our domestic operations. Going forward, this market will contribute more to our business.” At the moment, the domestic business contributes 20% to Concor’s revenues.

Sankalp Shukla, MD of logistics firm Inlogistics, feels that although domestic volumes are growing, realisations are lower. “In a shrinking market like this, we need to look for innovative ways to increase capacity utilisation and to reduce costs,” he said.

Even as operators try their hand at various options, analysts say the near-term outlook is rather bleak. Edelweiss Research analysts Krishnakant Thakur and Sumiran Mehta said in their December report, “With container traffic growth expected to decline in second half of FY09, and difficulty in movement of containers from port to the hinterland, performance of container train operators is likely to deteriorate in the short term.”