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Railway Budget 2016: Suresh Prabhu announces measures for freight to increase modal share

It also proposes to develop three dedicated freight corridors, draft a freight train timetable, increase the average speed of freight trains to 50 kilometers per hour and build rail side logistics parks and warehouses.

, ET Bureau|
Updated: Feb 25, 2016, 07.44 PM IST
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MUMBAI: India plans to review its railway freight tariff structure, expand the freight basket and build more terminals in a bid to recoup the industry’s fast shrinking share in cargo transport vis-à-vis other modes of transport.

It also proposes to develop three dedicated freight corridors, draft a freight train timetable, increase the average speed of freight trains to 50 kilometers per hour and build rail side logistics parks and warehouses.

“The modal share of Indian Railways has been consistently declining over a long period of time. This trend has had a negative impact not only on the Railways but on the entire economy. We are determined to reverse this slide,” railway minister Suresh Prabhu said in his budget speech to the parliament on Thursday.

Indian railways, a $25 billion industry that caters to 8 billion people annually and runs one of the largest railway networks in the world, is the only sector to have a dedicated budget.

“On the freight side, the government seems to be cognizant of the fact that in the past rail as a mode of freight transport has lost significant share and the budget outlines measures to regain share. This is a progressive step as the railways share of freight has fallen from 89% in 1950 to 31% currently due to several legacy infrastructure, regulatory and commercial hurdles, many of which have been addressed in some initial way in the budget,” said Prahlad Tanwar, director, transport & logistics at consultant KPMG.

Lower industrial demand too has had an impact. Prabhu said the freight earnings estimate for the current fiscal year would be revised downward to Rs 111,853 crore from Rs 121,423 crore in the previous estimate.

Manish Agarwal, Leader, Capital Projects & Infrastructure, PwC India, called the move for price rationalisation a “potential game changer” for the industry as it would reduce prices and attact larger volumes.

“Even for 1200 to 1500 km distances, road transport of containers is now 8-10% cheaper than rail. Also there is impending competition from coastal shipping and inland waterways,” he said, adding the policy will need to “combine personalised service and bulk discounts, to be competitive in chosen areas,”

In his budget speech Prabhu said the railway ministry is undertaking a full-fledged market study and assessing detailed supply and demand scenarios, service level and infrastructure requirements so that an action plan to re-capture freight traffic is developed and implemented.

The government also plans to develop a north-south corridor connecting Delhi-Chennai, an east-west corridor between Kharagpur, west Bengal and Mumbai as well and one on the east coast connecting Kharagpur to Vijaywada, Andhra Pradesh. He added that the two dedicated freight

Corridors between Delhi-Mumbai and Delhi-Kolkata will be commissioned by 2019.

“The three new DFCs are extremely important. These will enable economic linkages with eastern countries such as Vietnam, Thailand, Cambodia etc. by conecting the hinterland to the eastern seaboard of India, and give a push to Make in India,” said Agarwal of PwC India.

Industry stakeholders were mixed in their response.

“I won’t say I am elated but Mr Prabhu is certainly taking up the right issues and working extremely hard in a very difficult scenario. While the budget takes up important components of increasing modal share and rationalizing freight rates, the details of how this will be achieved isn’t so clear. Right now the railway line capacity is primarily dedicated to passenger trains. For freight trains to increase their share, there needs to be more dedicated freight corridors. All this will definitely take more than a year, maybe two years,” said Sachin Bhanushali, CEO of Gateway Distriparks.

Vineet Agarwal, managing director of TCI Group also said the budget “doesn’t address explicitly the efforts to increase the share of movements by rail compared to road sector.”

In his budget speech Prabhu also announced plans of developing rail connectivity for the ports of Nargol and Hazira in Gujarat through public-private partnership.

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