Financial Daily from THE HINDU group of publications
Monday, Oct 10, 2005
Financial Daily from THE HINDU group of publications Monday, Oct 10, 2005 |
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Logistics
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Railways Columns - On the move Enhanced freight target: Can the Railways carry it off? Santanu Sanyal
No wonder, the Rail Minister has internally suggested a higher target of 700 mt for 2005-06. Which means, to achieve this, the Railways has to move an additional 100 mt, registering a growth of about 16-17 per cent. The question that is uppermost in the minds of many is: Can the Railways handle an additional 100 mt? Many in the Railways feel that achieving 670-680 mt should not be much of a problem. In any case, the Railways is in a position to achieve last year's additional traffic of 45 mt and to it can be added another 20-25 mt, to be generated from the newly introduced CC plus 8 scheme. The preliminary reports suggest that most major freight loading zonal railways such as South East Central, South Eastern, East Coast, and South Central have recorded impressive loading in first six months of the current year, with most posting more than 20 per cent growth. The second half is usually the better period for the economy as a whole. It can, therefore, be expected that the second half performance will be better than the first. A section in the Railways, therefore, is of the view that achieving the Rail Minister's target is possible, though difficult. Yet others are not so optimistic. According to them, the actual traffic throughput this year will be around 650 mt and they give several reasons for their assessment. No doubt, the economy is doing well, but whether the user industries will offer the Railways the targeted volume of traffic for transportation remains to be seen. After all, the competition from the road sector is set to intensify with the ambitious highway projects. In the first half of this fiscal, the economy as a whole has done well, particularly the services sector. But the growth of this sector does not necessarily entail a corresponding growth in the transport sector. For the Railways, crucial is the growth of such sectors as mining, manufacturing and even agriculture. But the growth of the mining and agriculture sectors in the first half has been dismal. The growth of traffic for the Railways so far, therefore, has been largely due to the performance of the manufacturing sector, in the form of movement of raw materials and finished products. For instance, coal, which accounts for 45-46 per cent of the total freight loading of the Railways. The coal loading so far, though higher than that in the previous year, falls short of the target. There is a lot of unfulfilled demand. Which also explains the high price of coal in the e-auction system. The problem has been caused by unsatisfactory production of coal. Many new mines which were to start production have not yet been opened, because of a variety of problems relating to environment, rehabilitation of those to be evicted from the prospective mining areas and so on. No wonder, thermal power plants have begun to import coal. But that is no big comfort for the Railways. The volume of import and, therefore, movement from the ports will not be large enough to compensate the shortfall in domestic production and movement. This is again due to several reasons, such as high price of imports, bottlenecks at the ports to handle large volume of imports, and so on. So the Railways has little tofeel cheerful about. After coal, it is iron ore. While the domestic movement of iron ore to meet the requirements of steel plants has been satisfactory, that for exports has been somewhat irregular largely because of fluctuations in the international demand, particularly from China. At the beginning of the year, the exports were at a low ebb, resulting in poor demand for rakes, but picked up subsequently, so much so that some of the east coast ports (Paradip, Haldia) want the Railways to augment capacity so that they can handle the increased volume of traffic. But it will be some time before the Railways can add to its capacity. For example, the sanction for the work on the larger stretch of the doubling the railway line to Haldia dock is still awaited. Cement is another major item for the Railways. But cement is moved mostly in bags, not in bulk, limiting the scope of large-scale movement. More important, the Railways loses a chunk of traffic to road, particularly for short-distance haulage. For short-distance haulage, the rail is costlier than road. Longer transit time as compared to roadways and 15-20 per cent higher delivery cost leave manufacturers with no other option but to switch to roadways. The country's total production of cement is more than 100 mt and one per cent shift to the road will mean a loss of one million tonnes of traffic for the Railways. Petroleum products is still a major item of the Railway traffic. However, the volume is not increasing much because of the pipeline movement of petro products. Foodgrains movement too has been on a low key because the need for transporting foodgrains from surplus to deficit areas is no longer pressing. The argument that the traffic will pick up significantly in the second half is not convincing. In the second half of last year, the growth of traffic was impressive. Which means, the performance of the Railways in the second half of this year has to be substantial to post an impressive growth as it will start on a higher base. One wonders if the Railways will be able to achieve a higher rate of growth in the second half this year compared to the corresponding previous period, given the current state of various sectors of the economy.
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