The Railways recorded an eight per cent drop in cargo loading in October 2019
Despite removing a 15 per cent busy season surcharge, to attract more freight, the Indian Railways has seen an eight per cent drop in cargo loading this October against the same period last fiscal.
This eight per cent year-on-year (YoY) decline in October 2019 has been the sharpest in the last nine years.
In September, the Indian Railways decided to remove a 15 per cent busy season surcharge which would have kicked in from October 1, with an aim to make it cheaper for railway customers to move their cargo by rail mode, and also attract more cargo to the rail mode.
The movement of most commodities by the rail mode is lower in October 2019 as against October 2018. The commodities that are chugging less include: coal (drop by 12.5 per cent), raw material for steel plants except iron ore (almost 8 per cent), domestic container movement (almost 14 per cent), cement (14 per cent), clinker (almost 3 per cent), foodgrain (13.5 per cent) and domestic container movement (almost 14 per cent).
Not all commodities ditched the rail mode during the economic slowdown. The extra loadings were not sufficient to boost the total railways freight load to an improved growth rate, according to the railway data.
The commodities that were loaded more during the festive month of Diwali this year include fertiliser (6.5 per cent growth), domestic coal for steel plants (almost 3 per cent), pig iron and finished steel from steel plants (7.6 per cent), iron ore movement for export (more than double), and export-import containers (over six per cent growth).
The decline in total railway tonnage has resulted in almost nine per cent drop in October freight revenues. The year-on-year decline in revenues would have been much sharper (almost 11.72 per cent), if the Railways were not to include money received from NTPC. NTPC is a railway customer that pays in advance to reserve the wagons for moving products like coal.
While the Railways has contained the drop in revenue at below 10 per cent in October, a bigger concern is a 20 per cent drop in revenues against its budgeted target. As a result of the drop in cargo movement, earnings from freight in October contribute to a much lower 65 per cent (below two-third) in 2019, against 68 per cent (above two-third) in 2018.
“Railways is facing competition from road sector in moving certain commodities,” said an independent expert with experience in railway as well as road sector. To deal with such competition, Railways has started targeting smaller sized and lower weight commodities, called lesser than truck load. These are products where the more agile trucks moving on road sector have an edge.
Green push in slowdown
In fact, the services providers of the road sector are also adopting different strategies – with slowdown blues pushing companies to go green. More customers are willing to use the cheaper coastal shipping mode shunning roads, even if they have to spend more time in shipping the goods, according to Transport Corporation of India (TCI) Limited, a Rs 2500 crore company.
“First priority for customers is obviously price, and the green logistics factor is an added bonus. Coastal movement is 20 per cent cheaper for customers but it involves one third extra time,” Vineet Agarwal, MD, TCI told.
Sensing an opportunity on the coastal side, TCI, which has traditionally focussed on road, has invested in another vessel to start coastal movement of goods, something TCI terms “inorganic” from a strategy perspective. TCI, which saw the slowdown begin around Diwali (festival of lights) last year, expects a sustained recovery in growth only after monsoon next year.