News Railways

Train operators flay 10 percent busy season charge on box traffic, ET Infra


<p>Representative Image</p>
Representative Image

MUMBAI: Stung by what they claim as the “sudden” imposition of a 10 percent Busy Season Charge on container traffic without any “pre-intimation or engagement with stakeholders”, the container train operators said that the move will create “serious negative financial impact and push back the sector to a situation of extreme economic pressure”, drive traffic away from rail and hurt investments into the rail business.

To help resolve the vexed issue quickly and amicably, the Association of Container Train Operators or ACTO, a lobby group, has urged the Ministry of Railways to defer the rate increase by at least three months.

ACTO has asked the Railway Ministry to convene a meeting to discuss both pricing as well as related container sector issues and work towards a “consensus approach” to resolving matters for the growth of the industry.

“We specifically seek to develop a transparent, fair, and predictable haulage charge regime so that all such instances of changes in future do not result in sudden shocks and loss of business,” said Manish Puri, President, ACTO.

On 29 September, the Railway Ministry issued a circular brining container traffic under the ambit of the Busy Season Charge collected from various commodities and set a 10 percent rate as levy.

The model concession agreement (MCA) for container train operators specifies “at least a 15-day notice to be issued for levy of any changes in haulage charges, and as a sector it has been a long-standing demand that any changes in price need to be notified in advance so that the sector is able to inform our customers, renegotiate existing contracts etc”, ACT said.

“Generally, an advance notice period of at least 3 months is needed for such commercial activity, and to be notified on the last working day of a month of an increase that goes into effect within 24 hours will create a serious negative financial impact on the sector as the entire haulage increase will have to be borne by the container train operators,” Puri stated.

“The sudden and effective increase of 10 percent in all container levies with no pre-intimation or engagement with stakeholders has come as a shock to the sector,” he explained.

Container haulage was exempted from the levy of busy season surcharge as container movements (which are mostly driven by EXIM cycles) are not impacted directly by the Indian Railways seasonal freight cycles.

“Ever since the privatization of container train operations in 2006, this is the first time that a busy season surcharge has been imposed on this traffic. Railways need to provide a stable policy environment for container train operators to attract more private investment into the sector. Such policy changes will affect the investments into the sector,” ACTO told the Ministry.

The policy guidelines issued in 2015 for levy of Busy Season Charge on different traffic had excluded coal, coke, container and automobile traffic moving in NMG, BCACM, BCCNR and BCACBM wagons from its ambit.

“By now including containers under the Busy Season Charge, a selective discrimination has been made against the container sector. It is our contention that the container sector will continue to provide the maximum long-term potential for cargo migration from road to rail, but such discriminatory and cost escalatory initiatives will only work to drive traffic away from rail,” Puri asserted.

ACTO acknowledged that a period of relative stability in container haulage rates in the past few years has resulted in steady growth in business.

Besides, with the increase in rail capacity brought in by the Dedicated Freight Corridors (DFC’s), the trade had reckoned that there will eventually be a reduction in costs and an increase in the Railways modal share.

“A sudden unplanned increase in costs by 10 percent will have an immediate impact on the health of the business. Road sector does not face any seasonal surcharges (if at all, it often benefits from off season discounts). At a time when road costs have been dropping and service quality getting better due to improved road conditions, this increase in cost will lead to the rail sector becoming uncompetitive,” Puri said.

Implementing such a heavy cost increase also on empty running will further compound the impact on the business.

“As empty movement’s dry up, there will be increased equipment imbalances, leading to further increase in costs. Efforts to develop domestic circuits where some extent of empty moves are built into the business will also be severely impacted,” Puri said.

The container train operators have been requesting for a rationalisation in the haulage structure to attract more light cargo, permit operationally required empty moves at reasonable costs and in general address the issue of price competition with road more effectively.

“This current change will effectively negate our efforts and push back the sector to a situation of extreme economic pressure,” he said.

“At a time when the government’s effort is to work towards a reduction in the logistics cost and make Indian exports more competitive in global markets, this increase will work at cross-purposes with these clearly defined national objectives,” Puri added.

  • Published On Oct 3, 2023 at 09:44 PM IST

Join the community of 2M+ industry professionals

Subscribe to our newsletter to get latest insights & analysis.

Get updates on your preferred social platform

Follow us for the latest news, insider access to events and more.


Source link