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India rail freight Fixing India's overland congestion would do
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Page 2 of 2

In terms of the overall balance of trade in containers, India exported 5.1 million TEU while it imported 4.2 million TEU during 2014-15. Three major hinterlands in India - the northwest, west and southern clusters - account for 90 per cent of container volumes.

The northwest cluster is the farthest from the coastline and is the largest, generating 3.7 million TEU in 2014-15. It has the greatest impact on the overall logistics cost of container movement. It lies at an average distance of 1,087 kilometres from the Gujarat/Jawaharlal Nehru Port cluster.

The Gujarat-Maharashtra port cluster comprising Mundra, Kandla, Pipavav and Jawaharlal Nehru Port handles 70 per cent of India's EXIM traffic, while Chennai handles another 14 per cent. Other ports on the east coast - Haldia, Vizag and Tuticorin - account for the remaining container traffic. Seventy-eight per cent of the container traffic from the east coast ports is trans-shipped through Colombo, Singapore and Jebel Ali.

Mundra and Pipavav are the only ports whose primary hinterland (cargo catchment area) lies outside the state where they are located. Also, a significant portion of the total traffic from the hinterlands of the national capital region (NCR) and Punjab is handled at Jawaharlal Nehru Port even though they are closer to the Gujarat port cluster.

With respect to the modal mix for container movement from the hinterland to the ports, roads have an 82 per cent share while rail accounts for 18 per cent.

The average distance between manufacturing hinterlands and ports in India is 700-800 kilometres compared with 150-300 kilometres in China. Even though India fares better than China in the transportation cost for a comparable distance, longer hinterland to port distance leads to higher costs for exporting/importing a container in India as compared to China.

Higher rail haulage charges due to cross-subsidisation (unlike in China) make exports/imports expensive in India.

Due to the freight charges on road and rail and handling cost involved, rail in India is currently viable for exporters-importers only for a transportation distance beyond 1,000-1,300 kilometres .

This makes the northwest cluster the primary hinterland where rail becomes viable for inland container transport. But the cost differential between road and rail remains minimal even beyond a distance of 1,000-1,300 kilometres . Due to this, only 38 per cent of the total volume from this cluster moves by rail.

Assuming a scenario where Indian Railways charge only the cost incurred to transport containers without any mark-up, the viable distance for exporters-importers to use rail reduces to 600-700 kilometres. This implies many routes from the north-western hinterland to the ports will not shift from road to rail because of the economics involved.

Rationalising rail rates for containers can reduce the cut-off distance for the viability of rail from 1,000-1,300 to 400-500 kilometres. This will enable changing the modal mix from road to rail, especially for the northwestern hinterland to increase trade competitiveness, decongest roads and port gates.

For the immediate future on whether any progress can be made on this issue will resided for the time being with Railway Minister Suresh Prabhu. But one thing is clear, India must do something to rectify its overland situation or be left behind.

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