Indian Railway looks to increase share in automobile freight loading

India’s auto industry is boosting the freight loading of Indian Railways like never before. From Mahindra & Mahindra, Tata Motors and Hyundai to new entrants like MG Motors and Kia, there is a line-up of auto majors for using the railway rakes.

A sharp setback caused by the national lockdown to battle Covid pandemic saw automobile loading by railways falling to abysmally low level of just 2 rakes in April 2020, but this was soon reversed. The loading increased progressively to 33 rakes in May, 112 rakes in June, 159 rakes in July, 243 rakes in August and 287 rakes in September. The auto loading volume surpassed the year-ago level in July itself and skyrocketed since then. The September level was 120% higher than in the year-ago month.

Of course, the share of automobiles in the railways’ freight volume and revenue is still very low; the transporter relies on bulk commodities like coal, grains, iron ore and cement for much of its freight receipts.

According to the Railway Board, IR’s share for transporting small passenger vehicles has shot up from about 4.5% in FY18 to about 14% in July 2020 and this may increase to 20% by FY22 and 30% by FY24. Officials attribute the incipient trend of increase in use of railway rakes for transporting automobiles to “proactive approach” of Railways, increase in rolling stock and sharp decline in transit time. However, the current spike could also be due to the relative easiness and safety that transportation by rail offers, given the Covid-19 protocol.

The percentage share of IR in Tata Motors’ automobile transportation rise from low single digit level to above 10% over the past four months. Mahindra is also seeing a big spurt in transport of vehicles by rail.

“In Q2FY21, M&M has dispatched an average of 38 rakes per month against an average of 13 per month in Q2FY20. In three years, we plan to facilitate 22% of our dispatch through train from the current level of 12%,” said Veejay Nakra, CEO for automotive division, M&M.

The cumulative loading of 836 rakes in the April- September of 2020-21 has surpassed the loading of 731 rakes in the same period of 2019-20. Currently, IR operates two types of rakes (a rake is a full train) — small rake which can carry 100-125 cars and a big rake which can carry 275 to 318 cars.

India is expected to be the world’s third largest automotive market in terms of volume by 2026, driven by an industry which manufactures 26 million vehicles annually. The potential is obvious. Expansion of tracks, regular maintenance work, measures to enhance freight capacity and speed of trains, exemption of automobile traffic from payment of terminal charges, freeze on haulage charges and opening up of seven new terminals for automobile traffic at various zones are turning IR into an attractive proposition for the auto sector, the officials said.

Automobile loading was just 0.28% the IR’s freight receipts of Rs 1.23 lakh crore in FY20.

Source: Financial Express