Railways likely to lower rates for auto freight train operators

After reducing freight rates for container train operators, Indian Railways is likely to reduce rates for automobile freight train operators (AFTO).

Companies eyeing investments in the space include Maruti Logistics and APL Vascor. The move is part of Railways’ attempt to capture a larger share of automobile transportation.

At present, less than five per cent of automobiles move by trains, while the remaining are moved on trucks. This is unlike in other large geographies like the US where 70 per cent of vehicles move by trains.

Based on comments received from various stakeholders in mid-March on the proposed rates, the Railways is re-working the rates. “We are looking at the investor concerns. We would try to finalise the new rates within a month,” a Railway Ministry source said on condition of anonymity.

Poor investor response

The Railway Ministry has been eyeing this segment for a few years now, but has not yet been able to achieve success. There was no investor response to an automobile freight train policy introduced two years ago.

Now, Railways is tweaking the policy by adding more cargo and also simplifying the rate structure to make it investor-friendly. In the last week of February, Railways had invited comments from stakeholders for a re-worked automobile freight train operator policy andthe new rates proposed. But, investors have sought a further reduction in the proposed rates.

At least two potential investors in the policy Business Line spoke to said a further rate reduction is required, with one declining to be identified.

Transport Corporation of India (TCI), which moves about 10-12 rakes in a month and is keenly watching the space, also called for lower rates. “The movement by Railways has been lower on account of higher pricing. The new policy with twin-deck loading was to be a win-win for original equipment managers/logistics service providers and Indian Railways with OEMs (getting)… lower cost per car, while Railway gaining more freight per wagon. But, it has completely missed the objectives. In the proposed form as investment in rolling stock is being sought, rates will have to be attractive enough to warrant a long term commitment,” said Jasjit Sethi, CEO, Supply Chain Solutions, TCI.