Industry concerned about tariff revision for transporting vehicles by rail

Due to its flexibility and accessibility, road transport has traditionally been the predominant mode of transport to move the vehicles from the manufacturing centers to various destinations in India. Car manufacturers are gradually moving their vehicles from factories to destinations to rail, mainly to reduce logistics costs, meet sustainability goals and comply with emission standards. This also allows them to reduce transit time, carry larger volumes of vehicles at once, and ensure safety during transportation.

The Chetak Group, which has been in the industry for over four decades, is also considering joining the company. The company supplies car manufacturers such as Maruti Suzuki, Tata Motors, Hyundai, JCB, Kia and Honda.

Rail freight tariffs have also been stable for 10 years, which is a great support for the industry. However, the Department of Railways has changed carriage rates and increased the freight rate for Bogie Covered Autorake Double Decker Wagon (BCACBM) haulage by 20% from the current fiscal year.

“Car manufacturers have internal targets for the use of railways and are working towards achieving them. But with this tariff revision, manufacturers may need to reconsider their targets and possibly shift their volumes to other modes of transport,” said Rajesh Menon, director general of the Society of Indian Automobile Manufacturers (SIAM).

“The automotive sector did not expect such a revision. Rather, for the business plan, a gradual revision on an annual basis would have been more appropriate,” he said.

Industry experts believe that such a tariff revision came at a time when transport by railroad rake was increasingly becoming the preferred mode of transport. This interest rate revision could dampen growth.

Bal Malkit Singh, chairman of the core committee and former president of the All India Motor Transport Congress (AIMTC), said the 20 percent change in tariffs means the current freight structure is not viable given rising operating costs.

Maruti goes ahead

Maruti Suzuki was the first automobile manufacturer to use the railroad to transport its vehicles in the country. In the last eight years, the automobile manufacturer has increased its rail handling fivefold. In the 2015 financial year, 65,700 units were transported, in the 23 financial year there are now 3,35,245 units. In total, by FY23, the company transported over 14.9 million vehicles by rail and claimed to have avoided 6,700 tonnes of CO2 emissions.

Rail shipping has also helped the automaker reach its customers in the southern and northeastern states much faster. Maruti Suzuki has 40 railway rakes with a capacity to transport over 300 vehicles per rake. It uses 7 loading terminals in Delhi-NCR and Gujarat and 18 destination terminals – Bangalore, Nagpur, Mumbai, Guwahati, Mundra Port, Indore, Kolkata, Chennai, Hyderabad, Ahmedabad, Delhi-NCR, Siliguri, Coimbatore, Pune, Agartala, Silchar , Ranchi and Ludhiana.

Rahul Bharti, Executive Officer – Corporate Affairs, Maruti Suzuki, said that in order to congest roads, achieve greater energy efficiency and reduce carbon emissions, it is important to increase rail transport.

However, he added: “For rail logistics to be profitable, logistics costs must be lucrative and competitive. We hope that economies of scale will materialize as rail transport volumes increase.”

Looking ahead, the maker of WagonR and Swift is optimistic about rail transport and announced that it aims to systematically increase shipments by around 100,000 units per year in the coming years.

Industry experts are convinced that rail must continue to exploit the potential of a large part of automobile production for transport.

According to AIMTC estimates, the ratio of automakers transporting vehicles by rail vs
streets is about 1:7. At Maruti Suzuki it is around 14% and at other OEMs 12%.

Transportation of vehicles via railroads vs. roads

Industry experts assume that there is not much of a difference in cost over short distances
Transport via various means of transport. However, the transport costs on the road are almost twice as high as on long-distance rail transport.

According to estimates by SIAM, the cost of transporting a vehicle by road today is approximately INR 30,000 to transport a mid-size car a distance of 2,200 km. For transporting the same vehicle by rail, the cost is around INR 20,000.

In addition to reducing the carbon footprint, one of the main reasons for switching to rail was the significant increase in the cost of transporting vehicles by road over the past decade. While this increase and overall transportation costs vary from manufacturer to manufacturer, it largely depends on the volume of vehicles transported and the long-term collective agreements vehicle manufacturers may have with their logistics service providers.

It should also be noted that when transporting vehicles by rail, there are also additional costs for transporting the vehicles from the station to the point of sale. If siding infrastructure is not in place at the manufacturer’s premises, similar costs for the first mile from the manufacturing facility to the shipyards would also be borne by the vehicle manufacturers, Menon said.

When it comes to rail, car manufacturers also have to consider the costs of terminal handling.

Singh of AIMTC explained that unlike rail, roads offer the flexibility of first and last mile delivery. Road transport vehicles also offer the advantage of working according to the customer’s schedule.

To ensure safety, covered car transporters enclose the vehicle in a physical shell during transport.

The transporters are also specially designed for car transport and are equipped with loading lifts, cable winches, ramps and secure attachment points for the vehicle.

AFTO license The Ministry of Railways first introduced the AFTO (Automobile Freight Train Operator) directive in 2010. With the aim of encouraging logistics service providers to invest in railway wagons and increase the transport of finished automobiles by rail, the AFTO guideline was later amended and reintroduced in 2013 to replace the earlier guideline.

In 2018, the government relaxed the policy and lowered the registration fee from previously 5 crore INR to 3 crore INR. In addition, the number of rakes to be procured has been reduced from 3 to 1 and the restrictions on transporting automobiles in one direction have been lifted.

Maruti Suzuki India is the only SIAM member to hold an AFTO license. This license allows the company to manufacture and operate high speed, high capacity auto car rakes on the Indian Railways network. In addition, there are other private operators such as Transport Corporation of India, APL Vascor, IVC Logistics and others who have obtained the license to transport vehicles by rail.

Previously, Indian Railways also developed the New Modified Goods (NMG) rakes, which are mostly passenger cars modified to remove windows and welded passenger seats.

The vehicles are then loaded from behind into the empty capsule-like structure.

NMG and BCACBM Auto Loader wagons are currently used for vehicle transport.

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