Interview: Withdrawal of Port Congestion Fee to aid Volume Growth: DF/CONCOR

Volume growth in FY17 will be in double-digits, especially on the low base of FY16. The total volumes for the first nine months of FY16 were down 7.6 percent, says Alli Rani, Director-Finance, Concor, in an interview to CNBC-TV18.

Alli Rani DF CONCORThe Indian Railways on April 14 withdrew the 10 percent port congestion surcharge to attract imported freight.

Alli Rani, Director-Finance, CONCOR, in an interview says the withdrawal of this surcharge along with no hikes in tariffs will have a positive impact on volumes and margins.

She expects volume growth in FY17 to be in double-digits, especially on the low base of FY16.

The total volumes for the first nine months of FY16 were down 7.6 percent. Margins for the company were basically impacted by various external factors in FY16, says Rani.

When asked if they would be bidding for any connectivity projects, she said as of now there were no concrete proposals. Below is the verbatim transcript of P Alli Rani of CONCOR’s interview.

Q:What is the current freight price differential between roads and railways and with the elimination of this 10 percent port surcharge how comparable would the freight trades be and do you expect this to positively impact the volumes at Container Corporation of India (CONCOR)?

A: Yes, during the last year we did have keen competition from roads because of imposition of higher tariffs and the port congestion charges and service tax increased during the last year’s budget, so a lot of such factors had made us less competitive, but a lot of things have now happens since the current budget. We have got a lot of relief in tariffs and there was no tariff hikes by the railways during the last one year. We have got relief from finance ministry through the revival of credit for service tax paid for rail transport and now port congestion charges being waived, so all these things have very good news for our sector, rail container sector and we hope that this year we would get back on track as far as volume growth is concerned.

Q: How much of growth are you expecting because Q3 volumes were the lowest in about 10 quarters we were told, so FY17 volume how much will it be an improvement over FY16?

A: We have a lower base now we should be confident like there is no official outlook as yet. We are still kind of consolidating compiling our numbers, but I at least would expect that it will be in a double digit.

Q: You upped your authorised share capital. Will you be raising money?

A: Not necessary at all for us to raise money in the next at least two-three years. Of course our ministry, Railway Ministry had allowed higher share of foreign institutional investors (FII), so in that context there was a move to increase the authorised capital.

Q: At the Maritime Summit the minister spoke about integrated development of the hinterland and ports and he spoke of increased connectivity of the ports with the inland. Is there anything that you are bidding for the projects, he was naming about 150 projects including ports, are you all bidding for any of the connectivity lines?

A: So far there is no concrete proposal so bidding for any rail track projects, but if we think there is a strategic advantage for us because we are the main hinterland connector as far as rail transport of containers are concerned as well as we operate the most numbers of hinterland terminal and now we have also acquired PST licences so in our terminals we can also in addition to containers we also be handling bulk goods, so there could be a strategic advantage in any of these projects and then nothing would keep us back from bidding. Right now there is no concrete decision about it or any single specific project.

Q: You spoke about a double-digit growth in FY17, what about with the margin level we understand that the company was using rebates, especially, for export cargo and that has impacted your margins, in fact, in the first nine months of the year your margins have come down to 20 percent versus 24 percent year-on-year (YoY). Is that the strategy which is going to continue even in FY17 using rebates which hurt your margins but boost up volumes?

A: No, it not just rebates. As I said we had a lot of external factors that had affected our margins last year and that is why we had to rationalise even on our empty running because empty running is another factor when exports fall compared to imports and it affects margin also, so all those things as I told you right at the beginning that things have started reversing, for example the service tax credits which was denied for rail transport in previous budgets was again given back to us this year and Indian Railways itself didn’t announced any tariff hike which is another big good news for us and then this port congestion charges being waived, so all these things are external factors that affected our margins and if exports pick-up the only factor now remains is exports to pick-up and we also are very positive there with the kind of focus Ministry of Commerce, Ministry of Finance and in addition Indian Railways all of them together are putting into this area of international freight. I think exports will revive and then the last factor which was affecting our margins would also inch up and then after that we really won’t have to worry about margin.

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