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Santanu Sanyal

KOLKATA, Feb. 26

THE Railway Budget for 2002-03 is a pointer to the fact that the Indian Railways is slowly trying to have its role recast from transporter of bulk items between two points into a provider of logistics services.

There has been no across-the-board hike in freight rates, only some rationalisation mainly in the form of a reduction in the number of classes.

How the reduction is to be brought about is not clear from the Railway Minister's speech which observers said was "rather short and simplified''.

However, from the logistics point of view, three important proposals have been mooted: the proposals for creating warehousing facilities near Railway terminals; port connectivity on cost-sharing basis, and the introduction of high-speed refrigerated parcel vans.

In fact, a beginning has already been made with regard to providing warehousing facilities near Railway terminals, though the effort has not yielded the requisite results so far in the absence of clear-cut guidelines from the appropriate authorities.

For example, sometime back, a zonal Railway announced privatisation of some of its goods sheds in various terminals and accordingly invited offers.

Several firms responded but the matter ended there. If the Railways really want to encourage private participation in the construction and operation of warehouses near the terminals, more concrete steps will be needed. The proposal on port connectivity on a cost-sharing basis is a step in the right direction.

The history of the Railways is replete with instances where Railway lines were constructed at a huge cost on the basis of traffic projections but, subsequently, traffic did not materialise as projected resulting in huge investment losses.

The Pipavav example, where the Railways, the users, the State Government and port authorities are believed to have joined hands to set up the Railways link with the port, may have inspired the Railway Ministry to go in for similar arrangements elsewhere.

However, the specific basis of the sharing is not known as yet. After all, port connectivity is a dedicated service benefiting only importers and exporters.

Further, if for instance the container throughput at Nhava Sheva International Container Terminal doubles, the existing Railway network there may not be able to support it.

In such a situation, enhancement of Railway capacity on a cost-sharing basis will make a lot of sense.

The success of the scheme to launch high-speed refrigerated parcel vans will depend on the kind of response the Railways will get from trade and consumers.

For example, betel leaves from the east coast to the west coast, now being moved in ordinary parcel vans, can be moved in refrigerated vans provided the consumers on the west coast are not required to pay additional freight.

The manner in which some of the freight classes are being merged into other classes to bring down the total number of classes is not clear from the Railway Minister's speech. Even so, there are some commodities whose movement entails higher operational expenses for the Railways than the revenue earned.

It is, therefore, possible that some of the items now in a lower class will be put in a higher class and vice versa. It is expected that the freight-yielding items will be left untouched.

The proposal for raising, though marginally, the freight rates with respect to coal, iron ore and raw material for steel plants suggest that the Railways has come a long way from the days of the controlled economy where the objective was to keep the cost of raw materials as low as possible.

Coal is in a slightly higher class compared to iron ore and other raw material for steel industry, and by raising the freight of these items, the Railways appears to have taken a calculated risk.

It knows only too well that raw materials for steel plants cannot be moved by any other mode of transportation, especially trucks.

By simultaneously reducing the freight on finished steel items, which are also moved by trucks, the Railways has tried to send the message that the gap between the cost of transportation between roadways and Railways is getting narrower.

While the Budget proposal may have a big impact in diverting existing traffic from the road sector, it might at least set in motion a process of rethinking on the part of new customers.

Whether the proposal will be able to meet effectively the competition being posed by the pipeline projects for movement of petroleum products is, of course, another matter.

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