GST roll-out will facilitate factory transfers of larger volumes: ex.CMD/CONCOR

19vzskp3-CONCOR_20_1590904eNew Delhi: Container Corporation of India (CONCOR), the only listed company of the Railway Ministry with Navaratna status, has seen almost an entirely new set of management being ushered in, including independent directors. The company, at present, has no debt on its books, while it has some debt on its subsidiaries, ex.CMD of CONCOR Anil Kumar Gupta said.

He maintained that the view of the “present management” had been that taking more debt on CONCOR’s books would mean getting into a debt trap. The next management will have to take a view on the issue, he added. Excerpts:

Which are the top ports that account for the largest traffic, and the leading emerging ports on the West and East coast?

At present, 90 per cent of our cargo moves through four ports — JNPT (40 per cent), Mundra (17 per cent), followed by Pipavav and Chennai. The remaining 10 per cent moves through Visakhapatnam, Kochi and Krishnapatnam. Over the next few years, there will be some shift toward Mundra and Pipavav; and when the next container terminal starts operating in JN Port, there will be a shift towards it. Hazira is an emerging port, but there is no direct rail connectivity.

On the East coast, there might be built-up cargo. Paradip is trying to do very well now, although it wasn’t doing much containers till now. We have decided to make a terminal in Paradip inside the port. Also, Krishnapatnam will to do very well, with Maersk shipping line shifting to Krishnapatnam. Also, we are providing services between Krishnapatnam and Bengaluru and Krishnapatnam-Secunderabad. We will be running trains between Krishnapatnam and Chennai.

We are waiting keenly for Vallarpadam (South West). There are signs of that the port is doing very well this year. If the traffic increases, we will run a service — Vallarpadam to Coimbatore and Vallarpadam to Bengaluru. We run a Vallarpadam to Coimbatore service now, and will increase its frequency. Vallarpadam to Whitefield, Bengaluru had been discontinued, but can be restarted.

What about CONCOR’s capital expenditure in the next one-two years in terminals?

In the next two years, we will be spending on Visakhapatnam, Krishnapatnam, Paradip and Kochi. For this, land acquisition is already in place.

Will you have joint ventures for inland container depots?

We are always open if somebody comes to develop these on build-operate-transfer (BOT) basis. We have such arrangements in Dadri, where we have five container freight stations (CFS) in private space. We are floating expression of interest (EoI) for two CFS in Khatuas terminal again on BOT basis, as we want people to invest and remain with us for a longer period. I will be a landlord, ask them to build the CFS for revenue share. For CFS, the EoI will be floated in October/November. We are debating various issues, such as number of years and what if somebody were to get some land and does not develop it?

What were CONCOR’s key milestones in the past 8-10 years?

Up to 2006, when CONCOR was the sole operator, it was operating terminals on railway land. So, I did not have to buy that land, as there was an operating lease, which was an operating expenditure, and there was no depreciation and interest.

After 2006, in the name of level-playing field, we did not get any land. Now, we have to buy land. And looking at the logistics project, we are now becoming capital-intensive.

Earlier, my net worth/capital employed was not so much, so I was earning on a low capital base. Now, my capital employed has gone up. This is what has happened in CONCOR’s case, our return on capital employed has been declining. In the future, as a natural corollary, my capital employed will come down, as these are long gestation projects.

The third thing that we have been doing, which is deliberate, is that we want to reduce dependence on rail freight. At a point of time, about 80 per cent of our revenues were linked to rail freight. An increase in rail haulage charges could not then be passed on. So, we did not have to do leveraging. And we were driving away customers, as we only had rail services. Subsequently, we decided to expand our services into road to capture customers — for both rail and road traffic.

What are the expected changes in network after the Goods and Services Tax (GST) kicks in?

I am bullish about rail becoming a preferred mode simply because GST will facilitate factory transfers of larger volumes.

With GST likely to come in, we are preparing to have services for all modes of transport. For instance, earlier, if a customer had to send 15 boxes to different parts of India, we would be making multiple boxes. Now, a customer is free to keep the cargo in CONCOR’s warehouses in different locations and can ask CONCOR to pay GST on its behalf and then deliver the cargo. So, customers would want large volumes, and only the railway can provide that facility. Road can also provide the facility but large volumes require inventory management, which we have.

We are willing to go for outsourcing. We will have warehousing capacity and a manager to run the warehouse to meet customer requirements. If customers want to have their own person there with an integrated software solution, we can allow that. So, different models are emerging.

We have been doing this for IOC for last five years. We are handling their entire polymers distribution from Panipat to different places in India.

Ever since GST Bill has been passed, we have had meetings with 10 big corporates to discuss the potential change.

Does CONCOR have large amounts of revenue coming from few customers?

We rely on business associates for domestic traffic. Currently, 70 per cent of cargo is moved through business associates and 30 per cent through corporate clients.

With GST, our corporate client base is going to increase, as many of them also move through the consolidators. So, there will be shift in that pattern.

We are also aware that the business associates provide many services that we do not provide. For instance, we provide services based on credit for not more than 3-4 weeks, but some want a 12-week credit.

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