Logistics player Gateway Distriparks announced here today that it has elevated Sachin Bhanushali as chief executive of its rail freight subsidiary.
Bhanushali, who was president of Gateway Rail so far, would continue to report to Gateway Rail Chairman and Managing Director Prem Kishan Gupta, a company statement said.
He has been with the company since 2007 and had worked with the state-run Container Corporation of India (CONCOR) earlier.
Gateway Rail is one among 11 private container train operators and operates 21 train sets between its terminals in Garhi Harsaru, Ludhiana and Faridabad, as well as west coast ports.
Steep hike in Haulage charges will hurt ICD operations: Sachin Bhanushali
In an interview, Sachin Bhanushali, CEO, Gateway Rail Freight Ltd, shares his views on the steep hike in haulage charges. Excerpts:
Q: Help us understand how a steep hike in haulage charges of 25% to 41%, plus congestion surcharge of 10% for rail traffic originating at all ports impact your cost and customers?
Sachin Bhanushali: The charges which are levied by the Indian Railways on container train operators are in the nature of rail haulage charges and over a period of time, the structure of this rail haulage charges has emerged in such a way that it constitutes roughly about 75% to 80% of our overall cost.
It is a major input cost for us. It is the operations and management fee which is levied by the Indian Railways on us.
If we compare this with the road freight or the rail freight, over a period of last eight years since 2006 when this sector was deregulated, the average increase in all other freight has been to the tune of about 50%, while the rail haulage charges over this period have gone up by anywhere between 75% and 120%. The heavier slabs of containers have become more and more expensive across these nine changes, which have taken place over the period of last eight years, while the rest of the freight on Indian Railways has changed only five times.
There has been a bit of unfairness in dealing with the tariff part of it. This affects us deeply primarily because it makes the ICD operations, ICD by rail operations, more expensive and there is a tendency of the trade to shift towards the port side CFSes rather than operate from the hinterland ICD. So it goes against the principle of intermodalism.
Q: But what I want to understand is that in the past some of the players such as you and Concur, etc, have passed on the increased cost to clients and we understand that you intend to do the same as well with immediate effect this time. Can you just clarify and tell us?
Sachin Bhanushali: Yes, in fact, the increase is so steep. A 27% increase translates into roughly about Rs 5,000 to Rs 8,000 per container. This kind of margins does not exist in this business. So there is no alternative for us other than to pass on the entire cost in rupee terms to our customer. But along side that our other costs also go up. We do not get an opportunity to pass on those costs. So to some extent, our margins do get compressed whenever only rupee term increase is passed on our customers. The pressure on prices has always been very high because of both competition as well as the international sector itself demanding a very cheap price.
Q: To take off on that point you said that margins will be impacted, some brokerages seem to suggest that it will be just about 30 to 40 bps negative impact on the margins of your business. Would that estimate be correct?
Sachin Bhanushali: The actual impact would not be more than 50 bps, I would say, but it may result into shrinking of the overall addressable market because some of the businesses, particularly the light business which forms about 25% to 30% of the overall business, might prefer to shift to the port town CFSes rather than operate from the ICD. The real concern lies there.
Q: And in terms of your volumes, what is the split between the light and heavy cargo and how do you see volumes getting impacted in the second half?
Sachin Bhanushali: The lightweight cargo is roughly about 25% to 30%. In case for the NCR and Punjab markets, the lightweight cargo is slightly higher than that. It goes sometimes up to 40%. The lightweight cargo is also very-very price sensitive. So the price elasticity being very high, the tendency of this cargo to shift with every increase in the rail cost towards the port town increases.
In the second half, we do not see much of shift of the volumes immediately, but in the fourth quarter of the current fiscal, there may be some shift of the lightweight cargo. The overall sector has been growing roughly at about 14% during the last two quarters. This growth primarily is fuelled by increased containerization of the existing volumes itself, though the volumes themselves are not growing. But this may get impacted because of this freight increase resulting into the ICD volumes remaining at the same level or maybe going down by about 5% to 10%.