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  • OUTLOOK ARENA  >>   VIEWS ON NEWS >>  MARCH 2, 2006

    Railway Budget: Weight on freight!
    MYSTOCKS | FREE NEWSLETTER

    The 2006-07 Railway Budget announced a couple of day ahead of the Union Budget made some positive pronouncements for the rail freight industry. We delve deeper into the provisions of the railway budget and see how it impacts the freight carrying companies.

    Budget Announcements

    • Construction of a dedicated high axle-load freight corridor with an estimated investment of Rs 200 bn.

    • Better utilization of existing rolling stock by increasing the loading capacity of wagons from the current norm of 22.9 tonnes.

    • To increase the wagon manufacturing capacity by 25%. Introduction of corrosion resistant wagons to improve the availability and productivity of wagons.

    • Private sector-owned container trains to start by this fiscal. Plans to introduce double-stack container wagons on select routes.

    • To bring down the wagon turnaround time (average time between successive loadings for wagons) from the present 5.5 days.

    • To encourage a higher level of movement of perishable commodities like milk, vegetables and fruits and heavy machinery through rail. Freight rebate of 10% to be offered on movements of heavy machinery undertaken in special wagons owned by the customer.

    • Thrust on export-import connectivity traffic by providing hinterland rail connectivity to ports.

    Budget Impacts

  • Increasing the loading capacity of wagons will augment the total load capacity of existing rolling stocks. An increase of one tonne in loading capacity of a wagon will up the total capacity of railways for the year by 1 m tonnes (MT). During 2005-06, the loading capacity per wagon was increased from 20.3 tonnes to 22.9 tonnes, and the same is expected to go up to 25 tonnes. For 2006-07, the railways expect to move 726 MT of goods as compared to the expected 580 MT in 2005-06.

  • The proposed rail freight corridor will be developed in two phases - Delhi-Mumbai and Delhi-Howrah route in the first phase and Mumbai-Chennai and Chennai-Howrah in the second phase. The idea is to run high-speed freight trains with greater axle load of 30 tonne per wagon, with each train having around 200 wagons. Once operational, this corridor will provide adequate hinterland-port connectivity for the export-import traffic and thus result in significant increase in the volumes of goods transported through railways.

  • With the entry of new players in the container transport business, the container carrying capacity of railways is likely to go up significantly. Besides, competition will result in improved service quality and decreased freight rates (at present the charge to move a 20 feet container to Delhi From JNPT is around Rs 20,000). With 30%-35% of the total container traffic being moved by rail, the potential in this business is huge.

  • Railways are traditionally known for moving bulk commodities like cement, coal and fertilizers. With the introduction of more cold chains (refrigerated containers), it would be now possible to transport perishable products over long distances with minimum cost.

    Sector Outlook
    With the Indian economy growing at over 6% levels, demand for logistics services from industry users is likely to remain strong. The infrastructure measures announced in the Railway Budget are in line with the needs of the growing Indian economy. The Dedicated Freight Corridor Project coupled with the Golden Quadrilateral Project of national highways (5,846 kms) will provide the much-needed fillip to the infrastructure facilities and thereby improve the quality and cost of logistics services provided in the country. However delays in the implementation of these projects is likely to cap the growth momentum.

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