Ppp in Rail Container Movement- Implications and Opportunities (2006)

PPP in Rail Container Movement- Implications and Opportunities

------------------------------------------------

With the booming container trade in the country, the recently announced Rail Container Policy allowing private players in container transportation business presents far-reaching implications and opportunities for the stakeholders – comprising ports, logistics players, government, and economy as a whole. CRISIL Infrastructure Advisory analyses these implications and outlines possible opportunities in near future. Key concerns that must be addressed have also been highlighted

-----------------------------------------------

Promising Outlook for Container trade in India

Container trade is the fastest growing segment in the global as well as Indian sea-trade. The segment has clocked an impressive 14% annual growth since the last 4-5 years. Our research suggests that this trend is likely to continue and the trade from major ports has the potential to reach close to 17 million TEUs in 2015 from the existing level of 5 million TEUs

Increase in container trade can be attributed to two main factors – exponential growth in trade and increase in containerisation levels of the general cargo. In the last decade, the country has almost doubled its share in merchandise trade to grab a 0.8% share in the global world trade today . Further, strong economic growth and reducing trade barriers place india on a sound footing to double this share by 2009. Ease of container transportation and its associated economies has encouraged traders to gradually move from general cargo to containerised cargo. Containerisation of commodities has seen an increase both due to increase in the existing containerised commodities as well as new commodities being containerised, such as agri products and even coal and ores. This trend is expected to result in containerisation levels to increase to 70% in the next 10 years from the current levels of about 50%.

Dynamics of container trade are further accentuated by the gradual yet discernible shift in trade patterns. While today, EU and North America account for majority of India's container trade, the increase in trade with our Asian partners will see the intra-Asia trade rising to around 35% of India's container trade by 2015, or a whopping 20% increase year on year. The trade growth will be led by Indo-China trade, which has been increasing at 20% every year in recent times.

Increasing container trade, both globally and within Asia, would exert pressure on efficient logistics solutions for evacuation and delivery of containers, more importantly through railways, which offers the most economical transport option.

Railways has a potential to seize a larger share of container movement business

A small proportion of total container volume is currently moved by rail; entry of private operators in rail container movement business will not only compliment investments being made for expansion in line capacities for freight movement, but will also help increase container share of railways.

Presently Railways enjoys modest share in container movement

Analysis of total container traffic in India and traffic carried by CONCOR – presently India's only rail container carrier – shows that railways enjoys a relatively smaller share in surface movement of containers (around 30% of total container moved); while road transport draws the majority of container traffic.

The low share of rail transport in container movement is explained by both demand side and supply side factors. On the demand side, road transport is preferred due to its inherent flexibility of providing door-to-door service. Also, road transport operations are managed by private players, therefore delivery times are perceived to be more certain and road is preferred for time sensitive cargo.

On the supply side, container movement by rail has been capped due to constrained rail infrastructure. Non availability of rolling stock is often a cause for delays and loss of business. In addition to this, there are constraints in terms of line capacity along major routes (capacity / coverage), and rail handling facilities at major gateways – ICDs / Ports.

New container transport policy geared to leverage planned rail infrastructure enhancements, and enable railways to gain market share

Railways are making significant investments in building high capacity linkages for freight movement. Prominent among these are dedicated freight corridors, various port connectivity projects being