Dedicated Rail Freight corridor - way forward

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As somebody who has been immersed in Logistics for 50 years I have been a keen observer of progress of Dedicated Freight Corridors? (DFC) project for many years . This project interests me because of the reasons evident from the chat below

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The share of Railways in freight carriage has come down from 65 percent at the time of independence to 36 per cent a few years back and must have come down even further.

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As a thumb rule the cost of sea( water) transport is estimated to be Rs 0.30 per ton km , Rail Rs 1.0 per tonkm? and Road Rs 2.50 plus per tonkm. India does not have too much of scope for inland water ways and hence the need of the hour is to push much more freight to Rail Transport . The benefit is not only ?on total logistics costs of the user organizations and nation but also in terms of emissions norms and India’s long term commitment of net zero by 2070.

One of the main reasons for increase in freight carried by ?road is the heavy congestion on existing rail tracks in which both passenger and freight trains have to run .In spite of expansion of network over the years ,conversion to uni gauge system , doubling of tracks and rapid electrification of ?traction, the demand of passenger transport has given little scope for accommodating all possible freight on offer and also to meet transit time requirements.

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In this context the Dedicated freight corridor projects is a welcome development.

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As we see as of today 95 per cent of western freight corridor and 100 percent of eastern ?freight corridor have been completed and trains have stated running .It is reported that around 250 trains are running in these tracks .By the back of the envelop calculation with modern signalling technology around more than 1000 trains can rung both ways in these two corridors .

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FCR Yearwise : Number of Trains /Day Month FY 2020-21 FY 2021-22 FY 2022-23 Apr 25.7 113.5 May 34.5 129.7 Jun 46.7 148.1 Jul 54.3 154.9 Aug 56.1 159.9 Sep 56.2 154.4 Oct 67.1 150.0 Nov 63.0 175.2 Dec 0.5 77.9 194.0 Jan 20.8 96.0 214.6 Feb 28.1 94.6 222.0 Mar 32.0 99.5 226.1 Total 81.5 771.8 2042.3 Avg/ Month 20.4 64.3 170.2 Growth % over Last Year (LY) 216% 165% No. of Avg Trains run and % over LY

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Obviously at the moment the rakes running in the mainline tracks like container trains between ICD’s in North India and west coast ports , coal to power stations from east of India , grain trains, Fertiliser trains and petroleum product trains will be directed to ?DFC tracks .

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The DFC project is being funded in a debt-to-equity ratio of 2:1 with the debt being raised through a combination of bilateral/multilateral agencies. DFCCIL is likely to maintain this gearing despite cost overruns as IR will infuse additional funds as per requirements. DFCCIL will receive revenue from IR(Indian Railways) in the form of TAC( Track Access Charges) for the purpose of providing facilities. The company will not own any rolling stock or crew, nor will it have any role in fixing freight tariffs or collection of freight revenue. The IR will also be the final authority for deciding what and how much traffic has to be routed through the DFCs. However, the payments to DFCCIL are ensured through a TAC mechanism wherein the company will receive funds from IR to cover the fixed costs incurred, including debt obligations. The TAC mechanism is designed in a manner so as to cover all the costs of DFCCIL, including its debt obligations. This is irrespective of the traffic on the DFCs, and therefore mitigates all risks related to debt repayment by DFCCIL.

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The above is an extract from Credit Rating Report of this project . Though DFC Limited was incorporated in 2006 the work on the project commenced in earnest only around 2012-14 and the project has taken more than one decade to implement – it is quite natural as this involves a lot of land acquisition and lot of earthwork and bridges etc across waterbodies. But it is hoped that this experience will help in executing other proposed corridors be executed in quicker time and with no cost escalation .

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This project had so far involved more than Rs 100,000/- crores in capital and till now all costs are capitalised and revenue earned in 2022-23 just set off against capital.

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The TAC in the above extract indicates the revenue capture method and revenue comes from “ The access charges “. DFCL provides only rail line access and does not run trains . Trains are run by either Indian Railways or private train operators or some organizations who own wagon rakes under own your wagon scheme

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Therefore there are two issues here

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A)? Who will market use of the dedicated corridor – the Annual report of DFCL says

?“The Company has potential to introduce innovative services like Truck on trains (ToT), EMU based parcel express, refrigerated special trains for perishable commodities, e-commerce special trains, triple stack dwarf containers services, etc. ● Powerhouse rakes have moved on DFC alignment”

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But the services have to be provided by the Railways or the private train operators ,they have to conceive ,equip themselves with wagons , locomotives etc . We will discuss this later in this aper .

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B)? Currently? if Railways move freight the normal route they keep the entire freight but now if they shift to they have to art with Access Charges – do they pass on? this extra to customers – this is not transparent in public documents

C)?? The private train operators not only have to pay the haulage charges to Railways ( the locomotives or? what we commonly call engines ) but also pay the access charges to DFCL

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From the accounts statement for DFCL of 2022-23 the TAC tariff is not clear .For most f the commodities it is absolutely necessary to have the same freight charges whether through regular route or through DFCL – how this is going to be achieved in the Government system is a mystery

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In order that DFCL adds value to the economy the operators has to bring back the freight to the DFCL from road transport – let us analyse what was lost to road

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A)? Wagon Loads – Railways stopped accepting wagon loads from so many stations as it involved running many goods train between important junction picking up or dropping wagon loads from wayside stations – for example the author was material manager at a mineral mining and processing unit near Jamshedpur ( Tatanagar Station ) .The Railway station was Rakahmines? falling between Kharagpur? and Tataanagar . A goods train was run between these two station? each way daily picking up and dropping wagonloads the? many? important wayside stations . Depending upon the origin station for incoming wagons or destination for out going wagons trains were formed at the Railway Yards of Tatanagar or Kharagpur by shunting

As the revenue was not matching the efforts involved and also the pressure on capacity with more passenger trains and full rakes this was stopped. Till recently even half rakes were not accepted – even full rakes were not accepted for private siding if the rake was not placed alongside the loading /unloading platform in one length

B)? The smalls – both goods and parcels used to be carried. by Railways in goods wagons , break vans in passenger trains and Van Parcel Units as an add on to passenger trains . There was a time when full Parcel express trains on fixed schedule between metros ?with schedules stops in between.

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While a small amount of parcels are being loaded in passenger trains in break vans etc bulk of smalls have been lost to

?express cargo road transporters

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C)?? ?Normally bulk cargo moves through rail but if the distance is less than 300 km it is better by road as rail would have a first mile pick up and last mail delivery by road and multiple handling would not only mean more expenses but also material loss . But even in some cases where the distance was more than 300 km the bulk cargoes went by road when there was shortage of wagons and the material movement was urgent. Few years back iron ore as a hot commodity and China was lapping ?it at ?an unbelievable price.At that point of time the Bellary-Hospet mines moved the ore by dumpers to Goa and Mangalore ports rather than waiting for wagons to be placed

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It is said that number of multimodal logistics centres have come up or coming up enroute the dedicated corridors .it is also said that corridors will be connected to several PFTS ( private freight terminals ) The wagon loads? can be re captured back to some degree by using these terminals – A similar effort has been undertaken by Container Corporation of India Ltd by a hub and spoke approach – in this case the goods have to come to a container depot where it would be containerised and moved by road to nearest hub and loaded on unit container trains . Later in this paper we will discuss about using wagons instead of containers

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Container corporation also tried to capture smalls by consolidating smalls in hubs but this had not taken off and the road express operators offer door to door service

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Targeting Customers

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Targeting? the possible users can be easily generated by analysis of E waybills data from GSTN? ( specifically for these corridors )Initially target those heavy? goods which are transported by road because of non-availability of wagons and shorter distance

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Immediately some low hanging fruits can be looked at

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a)?? Auto transport – four wheelers, two? wheelers, skeletal new trucks moving for regional sales and body building by

owners. There is a huge two way transport of these items . Transportation could be specialised auto trains which are franchised? by Indian Railways – or the truck on tarin method, or NMG wagons ( new modified wagons ) or just long trailers ?on flat wagons

b)?? One can link the system of Trucks on Train from north India to already running on Konkan Railway for tracks to move directly to Goa /Mangalore and Cochin and on t reverse direction

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D)? Domestic container service for express cargo carriers and others – express cargo carriers will greatly benefit as they need not have huge number of attached trucks to whom they pay a rate by mileage at the same time guaranteeing minimum per month

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The scope of utilisation of DFC is immense and this should be utilised to the maximum so that main line capacity if released for growing passenger needs . There are two important elements need to be kept in mind.

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Domestic container services and Truck on Train must operate to strict time schedule – the problem with Railways is that they always wait for cargoes to form full rake . In that process in the early days the customers who gave freight? had to suffer high transit times and lost faith in Railways service . Railways have to demonstrate that they will run? trains on time schedule whether rake full or not to obtain the confidence of customers

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Second matter of importance is that ultimately customers do not want to pay more than what is being incurred by them now. This has to be kept in mind by Railways when they set tariff. Current ?railway tariff based on commodity grouping and weight based tariff does not suit light commodities .For example white goods move from north to south in large quantities – one wagon can only take a weight of 10 tons . By charging by weight it will be very expensive The white goods manufacturers use container trucks of special dimension on a truck which has a specified tonnage of 10 tonnes to load equivalent quantities – Railways have to? have flexible tariffs to suit? different commodities . They could have volume contracts with such customers suiting their specific freight needs

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Alternately run trains with such trucks on board – the ultimate objective is equivalent freight

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