Expert analysis and opinion on rail logistics in India is typically cautious. A resignation over its status quo seems to pervade our industries. In our interactions, however, our experts delve deeper into the actual reasons, both natural and not-so-natural, why rail logistics is at best inevitable or a last resort, and what precise steps are needed.
What is a typical duration in India needed to ship material by rail, versus over surface? Where do you find the main bottlenecks in your supply chain as a result of unreliable logistics or logistics systems with unacceptable turnaround times?
Thapar
The movement by rail is typically completed over a distance of about 600 km in 24 hours. However, the actual distance travelled would depend on the route by which the material is being moved. The movement on double-line, electrified corridors like Delhi-Mumbai and Delhi-Kolkata is faster as compared to other routes where trains have to move over large stretches of single-line sections. For example, the movement to Mundra port from the National Capital Region is slower. The de-bottlenecking of the National Capital Region to Mundra-Gandhidham area is, therefore, essential.
On the other hand, even routes that may have double lines, such as those from Delhi to Mughal Sarai and from Delhi to Mumbai, are often saturated.
The main bottlenecks in the supply chain are:
i) Inadequate availability of terminals for handling rail traffic,
ii) High rail haulage charges and frequent increases of those charges by the Railways,
iii) First-mile and last-mile connectivity by road to the rail heads because of unreliable road vehicle/transport linkages,
iv) Poor conditions of roads other than highways, particularly in the areas where the manufacturing of the goods takes place.
Chaudhuri
Rail transportation is measured on the basis of exact (shortest) rail distance between two specific rail points. If we classify transit time on the basis of distance, the approximate time cycle of transportation, considering time from door to door and at an average speed of 40-60 km/h, are as follows:
• Up to 500 km: 2.5-3 days
• Up to and above 1,000 km: 5-7 days
Procurement of power engine on time and condition of train running position are two vital aspects which influence the transit durations.
On the other hand, road transportation transit time can be classified on the basis of distance as below:
• Up to 500 km: 2-2.5 days
• Up to and above 1,000 km: 4-5 days
The extra time taken for transportation through rail includes transferring cargo from factories to railway loading point, requiring multiple loading/unloading operation.
Despite the comparative advantage of moving cargo through road compared to the railways, transportation through road is not an easy choice. This is due to reasons like inconsistent road conditions, several interstate check posts, typical and sometimes cumbersome paperwork formalities, threatening malpractices of transport related offices/departments, sudden possible civil unrest and protests, barrier caused by no-entry and chances of theft of vehicle. In addition, condition of the vehicles in bad road conditions and minimal use of technology (such as GPS and vehicle tracking), our experience has been that vehicle tends to reach approximately 25 per cent after the scheduled arrival time.
Railways provide safer, more reliable, less accident prone transportation compared to road transportation. However, road is preferred for goods classified under JIT deliveries, as that form of transportation does not involve multiple supply chain operations and costs are comparatively low. Even the types of vehicles available for road transportation are widely diverse in terms of design, weight and capacity. Cost and time being the most important factors for both suppliers and customers, road transport is often the choice over rail, except in case of full rake cargo over long haul distance, where rail transport is natural choice providing better total cost and time benefit.
What short-term and long-term adjustments do you need to make in order to overcome them? Which is costlier?
Sood
In the short term, there is a need to upgrade rail wagons and axle loads, develop wagons design that facilitate handling of specific commodities resulting in lower wastages and increase payload—thereby bringing in reduction in freight through savings in the cost/ unit and increasing efficiency by carrying higher volumes over the same systems.
Increase investment in enabling logistics infrastructure—freight stations, logistic parks and warehouses.
• Freight tariff for rail is cheaper vs. road transport to the extent of 25 per cent in absolute terms on distance of 700+ km. Greater the distance – greater will be expected savings on freight vs. road
• Tonnage Differential: Rail can carry much larger tonnage of goods than road due to higher payload capacity and higher axle loads e.g. railway container tonnage capacity is 15 per cent more vs. road tank cars. A road tank container maximum capacity is 21 mt (though effective carrying capacity is around 19 mt) whereas railcar containers carry 24 mt at minimum.
• Inventory cost savings: Rail cargo takes 25 per cent-40 per cent less time than road cargo in delivery to customer. The customer can accordingly plan its supply chain and minimise inventory and production costs.
• Loading/Unloading in a rail cargo happens only once per trip. Whereas in road cargo every time a loading/unloading takes place, the price/cost goes up by 50 bps to 150 bps.
Qualitative Advantages of rail transport over road transport:
• Administrative/documentation requirement: Each road cargo will have a separate set of documentation/approvals, hence for a set of 90 containers with 90 sets of documents will be required. Whereas for rail, only one set will be required for 90 – 135 containers at can be transported in one train.
• Seasonal impact: For 3-4 months of rainy season, the average distance traveled per day by road container reduces by ~25 per cent (275 km per day to ~200 km/day)
• Movement tracking: Easy to track movement of rail cargo through various rail terminals and electronic data systems vs. road cargo
• Pilferage/Loss due to handling: Rail transport offers greater benefits by reducing the points of handling and contact
Thapar
Short term adjustments for movement by rail cannot be made, particularly if the movement takes place on the saturated sections of the Indian Railways. Long term adjustments can be based on the hope that the Western and Eastern Dedicated Freight Corridors will come up in the next 5-6 years.
Cost comparison: The cost comparison for movement by rail in the supply chain link is highly skewed against itself because of the first mile and last mile connectivity required for connecting the supplier of the goods and the end user. Thus, for distance up to 600 km, road movement is cheaper. Rail movement becomes a viable option only for movements above 1,000 km.
This distance limit may also not be viable if the haulage increase on the container/logistics sector continues as witnessed in the last three years. Railways have the advantage of moving material faster and safer only over long distances because road transport is not able to compete effectively in this area.
Efficiency and reliability of transport does not have any conflict with quicker transportation of materials. In fact, we would like to have all the three. However, quicker transportation by rail is feasible only to a limited extent in view of the saturation of the main trunk routes of the railways. Quicker transportation by road will also have its limitations because of difficulties involved in improving the turn around of the road vehicles moving on saturated/congested highways.
Chaudhuri
Short term adjustments, will essentially mean relying on road transport:
• To enter into a road logistics contract or agreement with the fleet owners to the maximum extent possible,
• Graduate to multi-modal logistics,
• To ensure that Vehicle Tracking System is in place in case of Road Logistics,
• To obtain priority allocation of rakes (rail movement).
Long term adjustments, with the aim to acquire the benefits of rail transportation:
• To build own railway siding
• To participate in Own Your Wagon Investment Scheme
Rail logistics is always economical and better for transporting big volumes, provided the manufacturer owns a railway siding. The cost advantage in the logistic link in the chain is very important, particularly in the steel industry where market is very competitive and profit margins are low.
If we had to choose between quicker transportation at higher rate and efficiency and reliability from the steel industry point of view, we would choose the latter. A dedicated rail corridor directly from steel plant to customer zone can bring in better value, but for that the limiting factor would be the need for big volume cargo for every transportation trip.
In your experience, what are the inherent reasons and controllable constraints that the Indian industry does not prefer rail transportation over road logistics?
Thapar
The three main reasons why the industry does not prefer rail transport are:
i) Lack of first mile and last mile connectivity with rail heads
ii) Poor service quality and inadequate reliability of service
iii) Pricing of rail transport
In the logistics sector, particularly the movement of containers, long distance movements of heavy containers has to be taken up by rail. The movement of light weight containers over shorter distance is, normally, undertaken by road.
Chaudhuri
Additionally, rail routes and timing cannot be adjusted to individual requirements. There is also no flexibility in quantity (in case of rail movement, a minimum of 2,500 mt is needed for a rake load).
Also, intermediate loading or unloading involves greater cost, more wear and tear and longer time need. The time cost of terminal operations are a great disadvantage of rail transport.
Sood
Our network runs on different standards and specifications. While traffic on Indian rail system has grown over tenfold between 1951 and 2009, rail track length has grown only 1.4 times. Despite efficiency improvements in gauge conversion, electrification, safety, etc, there is still a stark gap in traffic and infrastructure growth. The problem is compounded by the fact that the same network is used for freight and passenger movement. In an over crowded network, passenger movement tends to take precedence over freight movement.
Inadequate rolling stock: Constrained financial resources coupled with multiple commitments for expenditure have forced Indian Railways to prioritise their investments on standardising and upgrading the core infrastructure i.e. railway network. This has resulted in inadequate focus and investment in growth of volume of and development of more efficient/ specialised designs of rolling stock required for handling specific commodities. Despite being the fourth largest in the world, IR has a total capacity of around 250,000 wagons versus approximately 1.7 million wagons in North America.
Lack of enabling infrastructure: Lack of enabling infrastructure like warehouses and terminals to efficiently handle loading/ unloading and storage of materials has limited the use of rail as a preferred mode of transportation despite its inherent advantages over road transportation over medium and long distances.
What kinds of collaboration are possible with the private sector in rail logistics and supply chain management?
Chaudhuri
The Railway Board has introduced a new policy, the Railways Infrastructure of Industry Initiative (R3i), which is aimed to attract private participation in rail connectivity projects. Although there has been little progress, this initiative is good in its promise, as it aims to address one of the most bothersome impediments of rail logistics growth, ie, connectivity between factories and main railway lines.
Thapar
The private sector can collaborate in rail logistics in at least five areas:
1. Development of terminals with rail sidings
2. Movement of automobiles in specially designed wagons particularly for movement of cars
3. Development of specialised terminals for handling bulk commodities like cement and chemicals
4. Improvement in the port rail/road connectivity
5. Development of dedicated rail tracks for feeding certain sectors like steel, iron ore and coal.
By when do you believe we can achieve seamless integration in connectivity with hubs such as ports? What should be done in order to achieve this goal?
Chaudhuri
Public Private Partnership (PPP) and Dedicated Freight Corridor (DFC) are two of such significant initiatives. However, successful translation of those plans into dependable seamless integration with hubs such as ports, would necessarily entail comprehensive achievement of enabling factors. If we would like to achieve seamless connectivity within, say, the next 10 years, three criteria would be critical:
1. Major activities in PPP like land acquisition for road connectivity, building Logistics Parks / Hubs etc are successfully taken care and implemented by the Centre and its related agencies.
2. PPP offered by the Indian Railways should be long term, simplified and transparent, mutually beneficial, and sustainable to encourage deeper participation of the private investors.
3. Fully coordinated support of central and state government agencies is imperative to implement all phases of projects including those in the PPP space successfully.
Thapar
Seamless integration and connectivity especially with ports may take 5-10 years from now. Many projects in port connectivity are underway. While improving the port connectivity by rail, development of adequate capacity at ports for quicker clearance of exim traffic is essential.
Disclaimer : Views are personal
The experts:
Abhijit Chaudhuri, Director—Supply Chain Management, Ispat Industries, which uses rail and road transportation for speciality steel and hot rolled coils.
Dr LR Thapar, MD, Rail Operations, Hind Terminals, one of the first private organisations licensed by Indian Railways to operate container trains to ports.
Saurabh Sood, Managing Director & Country Head, GATX India, whose US-based parent company provides leasing services to customers operating rail.
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