evolution of domestic container business
TRANSCRIPT
“EVOLUTION OF DOMESTIC CONTAINER BUSINESS IN INDIA”
A PROJECT SUBMITTED IN PART COMPLETION OF MASTERS OF
MANAGEMENT STUDIES (MMS)
TO
THAKUR INSTITUTE OF MANAGEMENT STUDIES AND RESEARCH (TIMSR)
BY-
VIKASH JAISWAL
MMS OPERATIONS
ROLL NO. 30
UNDER THE GUIDANCE OF-
PROF. SUHAS PRABHU
HOD- OPERATIONS
FULL TIME- BATCH- 2014-2016
Shyamnarayan Thakur Marg, Thakur Village,
Kandivali (East), Mumbai 400101
DECLARATION
I hereby declare that the project report entitled, “EVOLUTION OF DOMESTIC
CONTAINER BUSINESS IN INDIA” submitted to Thakur Institute of Management
Studies & Research, Mumbai, is a record of the authentic work done by me under the
guidance of Prof. Suhas Prabhu, and this project work is submitted in fulfilment of the
requirements for the degree of Masters in Management Studies. The results embodied in this
thesis have not been submitted to any other Institute or University for the award of any other
degree or diploma.
Place: Mumbai Vikash Jaiswal
Date: MMS – Operations
Roll No.: 30
(Batch 2014-16)
Faculty Mentor: Prof. Suhas Prabhu Dr. Ramakumar Ambatipudi
H.O.D (Operations) In-charge Director
TIMSR TIMSR
ACKNOWLEDGEMENT
“It is not possible to prepare a project report without the assistance & encouragement of other
people. This one is certainly no exception.”
On the very outset of this report, I would like to extend my sincere & heartfelt obligation
towards all the personages who have helped me in this endeavour. Without their active
guidance, help, cooperation & encouragement, I would not have made headway in the
project.
I would like to express my heart full gratitude to my mentor Prof. Suhas Prabhu who guided
me for my final project. I am extremely thankful and pay my gratitude to other faculty for the
valuable guidance and support on completion of this project report.
I extend my gratitude to Thakur Institute of Management Studies & Research for giving
me this opportunity.
I also acknowledge with a deep sense of reverence, my gratitude towards my parents and
member of my family, who has always supported me morally as well as economically. At last
but not least gratitude goes to all of my friends who directly or indirectly helped me to
complete this project report.
Any omission in this brief acknowledgement does not mean lack of gratitude.
- Vikash Jaiswal
-
EXECUTIVE SUMMARY
The project entitled “Evolution of Domestic container business in India” is about Indian
Railways Policy for introducing Competition in Containerization Business permitting private
operators to operate container trains. Indian Railway (freight) lost its market share to road
(from 89%- 30.1%) whereas that of road grew from 11% to 61%. Indian Railway with the
objective of developing multimodal transport and logistics support for India’s domestic and
international containerized cargo and trade set up ‘Container Corporation of India Ltd
(CONCOR)’.Container movement by rail was a monopoly of Indian Railways (IR) and its
subsidiary, Container Corporation of India (CONCOR) was the sole operator of container
trains in India till 2006. The Ministry of Railways (MoR) in its budget speech 2005
announced to permit private operators to run container trains. Entry of other entities in 2007
has been driven by larger public policy concerns. In the process, issues such as resistance of
the incumbent, erection of entry barriers, denial of level playing field, use of a closely held
organization as a consultant, and conflicting roles of IR as licensor, regulator, service
provider, and operator came into sharp focus. This project attempts to review the process
starting from the policy announcement (February 2005) to evolution of a Model Concession
Agreement (January 2007) and shows how policies were influenced by the incumbent to
restrict competition by creating barriers on the one hand and how an alternate view provided
by external entities, like the Planning Commission and other non-IR stakeholders
significantly altered the course of action leading to entry of a large number of competing
players.
LIST OF FIGURES
Sr. No. TITLE Pg. No.
1 Indian logistics market 06
2 Comparative analysis of Indian logistics sector 06
3 Elements of Logistics Cost in India 10
4 CONCOR’s Performance 11
5 Multimodal transportation 12
6 Intermodal Transportation 13
LIST OF TABLE
Sr. No. TITLE Pg. No.
1 Entry Fee Proposed by RITES 19
2 Areas of operation and Registration fee 31
3 Entrants 39
4 Some Aspects of CONCOR's Operations 51
LIST OF ABBREVATIONS
MR Minister of Railways
MoR Ministry of Railways
ICD's Inland Container Depot
CONCOR Container Corporation of India
IR Indian Railway
CWC Central Warehousing Corporation
PRCL Pipavav Rail Corporation
COI Committee of Infrastructure
JNP Jawaharlal Nehru Port
PC Planning Commission
MoCI Ministry of Commerce and Industry
DoS Department of Shipping
ADC Advisor to Deputy Chairman,
Planning Commission
MCA Model Concession Agreement
PSCT Port Side Container Terminal
CFS Container Freight Station
FOIS Freight Operation Information System
IMG Inter-Ministerial Group
NSICT Nava Sheva International Container
Terminal
RB Railway Board
RDSO Railway Design and Standards
Organisation
RR Railway Receipt
NTKM Net tonne kilometre
Table of Contents
Sr. No. INDEX Pg. No.
1 Introduction 1
2 Situation Analysis 2
3 Literature Review 3
4 Profile of Indian Logistics Industry 6
5 Introducing Competition in Container Movement by Rail 11
6 RITES Report 16
7 Planning Commission’s concerns on RITES’ proposals 21
8 Revised paper by the PC 23
9 Response from the RB 25
10 Meeting with stakeholders 25
11 Summary of responses received from stakeholders 26
12 IMG meeting and the draft policy 29
13 The final policy 30
14 Policy to Permit Various Operators to Move Container
Trains 32
15 Model Concession Agreement 41
16 Issues 44
17 Findings 46
18 Recommendations 47
19 Learning Outcomes 49
20 Exhibit 1: CONCOR, the Incumbent 50
21 Exhibit 2: RITES, the Consultant 59
22 Exhibit 3: PC’s Note dated 22nd October, 2005 60
23 References 63
24 Biblography 64
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Introduction
The Indian economy has been growing with an average growth rate of approximately 7%1
over the last two decades putting enormous demands on its productive infrastructure.
Whether it is the physical infrastructure of road, ports, water, power etc. or the digital
infrastructure of broadband networks, telecommunication etc. or the service infrastructure of
logistics – all are being stretched to perform beyond their capabilities. Interestingly, this is
leading to an emergence of innovative practices to allow business and public service to
operate at a higher growth rate in an environment where the support systems are getting
augmented concurrently. In this paper, we present the status of the evolving logistics sector in
India, innovations therein through interesting business models and the challenges that it faces
in years to come.
Broadly speaking, the Indian logistics sector, as elsewhere, comprises the entire inbound and
outbound segments of the manufacturing and service supply chains. Of late, the logistics
infrastructure has received lot of attention both from business and industry as well as policy
makers. However, the role of managing this infrastructure (or the logistics management
regimen) to effectively compete has been slightly under-emphasized. Inadequate logistics
infrastructure has an effect of creating bottlenecks in the growth of an economy; the logistics
management regimen has the capability of overcoming the disadvantages of the infrastructure
in the short run while providing cutting edge competitiveness in the long term. It is here that
exist several challenges as well as opportunities for the Indian economy. There are several
models that seem to be emerging based on the critical needs of the Indian economy that can
stand as viable models for other global economies as well.
The two key areas that require attention in managing the logistics chains across the Indian
business sectors – cost and reliable value add services. Logistics costs (i.e., inventory
holding, transportation, warehousing, packaging, losses and related administration costs)
have been estimated at 13-14 per cent of Indian GDP. This is considerably higher than the 8
per cent of USA’s and lower than the 21 per cent of China’s GDP2. Service reliability of the
logistics industry in emerging markets, like India, has been referred to as slow and requiring
high engagement time of the customers, thereby, incurring high indirect variable costs.
1 https://en.wikipedia.org/wiki/Economy_of_India
2 https://www.cargoji.com/blog/index.php/2016/03/04/the-changing-face-of-the-indian-logistics-system-2/
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Situation Analysis
Logistics in India
India has become the prime destination for logistics service provider all over the world. The
demand for logistics services in India has been largely driven by the remarkable growth of
the economy. The growth is expected to gain greater momentum due to growth of Indian
economy. India is also experiencing a big retail boom as the buying capacity of the middle
and upper middle segment of the population has scaled new heights. Many large
multinationals from the retail industry are planning to set up operation in India and large local
retailers re also planning to expand their operations. But with the underdeveloped and
incapable of catering to a growing economy, logistics management in India becomes too
complex. In spite of dismal infrastructural scenario, the hopes f the logistics sector are kept
up by the various upcoming infrastructural projects like logistics parks and hubs and other
initiatives by public and private sector. The future of logistics sector depends not only on the
continued development of infrastructure but also on capability of service providers in
adapting themselves and making optimal utilization of technology.
Container cargo represents only about 30% (by value) of India’s external trade much lower
when compared with global containerized cargo average of 70-75%. At a growth rate of 12%
India’s container cargo traffic is estimated to reach 15 million by FY16E. This would be a
huge opportunity and will significantly benefit container rail operators.
Rising investment in the rail and port spaces also fuels growth in allied industries like wagon
manufacturing, port handling equipment, railway electrification systems and construction
companies.
To reduce the transportation costs and for quicker movement of Cargo multimodal transport
operation is introduced. Multimodal transport helps exports with less documentation for
instance single document for all modes of transport.
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Literature Review
Competition in Rail Freight Transport: The Case of Indian Railways, University of
Leeds LS2 9JT, UK, Manoj Singh, Commonwealth PhD Scholar, Institute for
Transport Studies36-40 University Road
Indian Railways in opening up its intermodal freight segment to competition. This approach
attempts to promote competition within the existing structure of integrated monopoly
operation. For the Indian economy which is one of the fastest growing in the world, railways
still have a relatively high share of the freight and passenger market. Any impact on its
competitiveness has a downstream impact on many sectors of the economy. Due to the rapid
globalisation of the Indian economy, the intermodal sector has assumed greater significance
as it involves transport connectivity between the ports and the hinterland. Internationally, this
process is of significant interest, due to the lessons learnt and transferability of the
experiment across other economies. A survey of the new entrants into the newly opened
freight sector was carried out in India in July and August in 2006. In-depth semi-structured
interview was the preferred survey instrument chosen due to its advantage in getting
responses in complex and dynamic situations. For this reason this approach was considered
more suitable than a questionnaire survey. Out of the 13 new entrants, it was possible to
interview 11. CEO or project directors who were directly involved in launching these projects
were interviewed. Most of the entrants were in related businesses. Unrelated diversification
was the reason given by only one of the entrants. Most of the entrants found the initial
conditions of entry fairly simple and straightforward. Access to land for terminals and
uncertainty of haulage charges have emerged as crucial barriers although they have not
deterred entry. The principal advantage of intermodal is ease of implementation but one
possible constraint is the limited possibility of cost reduction.
4 | P a g e
The Logistics Sector in India, Pankaj Chandra & Nimit Jain, Indian Institute of
Management Ahmedabad Vastrapur, Ahmedabad
With rising consumer demand and the resulting growth in global trade, the role of
infrastructure support in terms of rails, roads, ports & warehouses hold the key to the success
of the economy. Goods are transported predominantly by road and rail in India. Whereas road
transport is controlled by private players, rail transport is handled by the central government.
With the second largest network in the world, road contributes to 65 per cent of the freight
transport. Road is preferred because of its cost effectiveness and flexibility. Rail, on the other
hand, is preferred because of containerization facility and ease in transporting ship-containers
and wooden crates. Sea is another complementary mode of transport. Ninety five per cent of
India’s foreign trade happens through sea. Because of the growing opportunity and potential
for high revenue, the Ministry of Railways has been taking measures to expand the rail
connectivity and recapture the market share of freight business. By focusing on improving
wagon utilization, the Railways have managed to reduce the freight cost from 61 paisa per net
tonne km (NTKM) in 2001 to 56 paisa per NTKM in 2005. At present, goods train run on
same railway tracks as passenger trains at an average speed of around 25 kmph. With the
proposed dedicated west and east freight corridors, the goods trains are expected to run at
100kmph. The West and East rail corridor of 1469-km and 1232-km will be built with an
investment of $2.60 bn and $2.40 bn respectively and will be equipped with the latest
centralized traffic control systems. Indian Railways has also decided to collaborate with bulk
users of freight transport to build the rail network in a Public Private Partnership (PPP) mode.
The first project on this line comprises nine public and private sector companies that are
building 82-km rail line between Haridarpur and Paradip at a cost of $ 120mn. Recently
several steel companies have also shown interest in linking iron and coal mines in Orissa with
a 98-km rail line. Multi-modal transport in India was a monopoly of the Container
Corporation of India till 2005. With licenses being given to 13 new private players, rail trade
should improve considerably. In order to encourage trade by small scale industries, Indian
Railways has started a “road-railer” system where container vehicles are capable of running
both on highways hauled by trucks and on rail. In 1998-99, the Konkan Railway (one of the
railway zones in South-Western India) pioneered the 'roll-on, roll-off' ('RO-RO') concept
between Mumbai (Kolad) and Goa (Verna).
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Container Train Operators in India, Rachna Gangwar, W.P. No. 2010-09-01, INDIAN
INSTITUTE OF MANAGEMENT AHMEDABAD
Traditionally, railways worldwide have been under the control of the federal government. In
the past few decades, many developed countries including the US, UK, Japan, and European
Union have undergone various reforms and even restructuring of their railway systems to
convert the state owned monopolies into public private partnerships with a competitive
environment. Both freight and passenger services in these countries are provided by multiple
operators. In some other developing countries including China, Russia, Malaysia, and India,
all freight and passenger operations are managed by the government owned railways.
Recognising the potential of container based movement, the railways of these countries have
segregated the container operations by creating subsidiaries which are the sole providers of
container rail haulage. India also created the Container Corporation of India (CONCOR) as a
monopoly container train operator (CTO) in 1988. India has moved a step further in 2006
after opening up the container rail sector to competition, involving private and public sector
operators. The policy was formed with the help of RITES consultant. The response to the
policy was good and 15 new entrants obtained licences to run container trains. Due to lack of
clarity or inconsistency in matters pertaining to haulage charges, maintenance of wagons,
transit guarantees from IR and terminal access charges, operators started feeling skeptical
about the viability of the business.
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Profile of Indian Logistics Industry
Indian logistics industry is ~3% of the global logistics and is highly fragmented so far.
Logistics industry comprises of three major segments ‐ transportation, storage and value
added services. Based on the analysis of various sub‐segments in the Indian context on
various comparative factors, companies in the storage and the value added service segments
are well‐placed to capitalize on growing Indian economy.
Figure 1: Indian Logistic Market3
Figure 2: Comparative analysis of Indian logistics sector
3 http://www.arshiyalimited.com/Downloads/Investors/Analystreports/KarvyLogisticsThematic22-03-2012.pdf
7 | P a g e
SWOT Analysis of Indian Logistics Industry
Strength
Logistics Industry contribute 10%-13% in GDP in India
Ranked at 46th position in world (2012)
Vital role in import and export business
Cheap labour available in India
Improve infrastructure like development of new roads, railroad, ports
100% in FDI in India
Quality & Reliability
Direct delivery capability
Currently industry use latest technology
Weakness
Poor performance in Infrastructure facilities in India.
Lack of experienced people while taking strategic decisions.
Poor physical facilities like road, port, railroad etc.
State and central government policies over industry like import restriction over certain
products and export of certain scare products.
Competitors from international players like DHL, UPS, FEDEX, Blue dart etc.
Indian Logistics Company adopts inadequate technology compare to foreign
competitors.
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Opportunities
Growth and future of 3PL market in India
CRISIL Research has estimated the 3PLmarket in India at Rs. 47-50 billion, which is
expected to grow at a CAGR of 27% to Rs. 162-165 billion.
3PL penetration has been the highest in sectors such as cars and organized retail. The
segment is also gaining importance in other sectors such as IT hardware and FMCG. The
share of 3PL in the overall logistics market is expected to increase from around 1.5 – 20% to
3.5%-4%. The benefits would accrue in the form of:
Reduction in warehousing space requirement.
Improvement in efficiency due to better inventory management
Reduction in transportation cost due to higher capacity utilisation.
The segment is also gaining importance in other sectors such as Power, Infrastructure, and IT
& FMCG.
Threats
Logistics has historically been a high-cost, low-margin business. The problem of
organized players is compounded by unfair competition with unorganized players, who
can get away without paying taxes and following operating norms stipulated in Motor
Vehicle Act such as quality of drivers and vehicles, volume and weight restrictions etc.
Economies of scale are absent in the Indian Logistics industry, Even the organized
sector that contributes slightly more than 1% of the logistics cost, is highly fragmented.
Existences of the different sales tax structure have brought diseconomies of scale.
Though VAT has been implemented since 2005, failure in uniform VAT structure
across different states has let the problem persist even today.
Apart from non-uniform structure, Indian LSPs have to pay numerous other taxes,
octroi, and face multiple check posts & harassment from authorities. High costs of
operations and delays involved in compliance with varying documentation
requirements of different states make business unattractive. It is assumed on an
average, a vehicle on Indian roads loses 24-48 hours in complying with paperwork and
formalities at different check posts enroute to a destination and also precious fuel is
spent waiting at check posts.
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Some Peculiarities of the Indian Supply Chains
The Indian logistics sector has typically been driven by the objective of reducing
transportation costs that were (and often continue to be) inordinately high due to regional
concentration of manufacturing and geographically diversified distribution activities as well
as inefficiencies in infrastructure and accompanying technology. Freight movement has
slowly been shifting from rail to road with implications on quality of transfer, timeliness of
delivery and consequently costs except for commodities which over long distances,
predominantly, move through the extensive rail network.
The transportation industry is fragmented and largely unorganized – a large number of
independent players with regional or national permits that carry freight, often with small fleet
size of one or two single-axle trucks. This segment carries a large per cent of the national
load and almost the entire regional load. This fragmented segment comprises owners and
employees with inadequate skills, perspectives or abilities to organize or manage their
operations effectively. Low cost has been traditionally achieved by employing low level of
technology, low wages (due to lower education levels), poor maintenance of equipment,
overloading of the truck beyond capacity, and price competition amongst a large number of
service providers in the industry. Often, one finds transportation cartels that regulate supply
of trucks and transport costs. However, the long run average cost of transport operations
across the entire supply chain may not turn out to be low. Figure 1 shows the relative value of
transportation costs vis-à-vis other elements of the logistics costs in India.
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Figure 3: Elements of Logistics Cost in India4
4 http://globalbizresearch.org/files/6029_irrem_s-ramachandran-mayur-s-nakhava-kumar-pratik-141856.pdf
35%
25%
14%
11%
9%
6%
0% 5% 10% 15% 20% 25% 30% 35% 40%
Transportation
Inventories
Losses
Packaging
Handling & Warehousing
Customer's Shopping
Elements of Logistics Cost in India
Percentage Cost
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Introducing Competition in Container Movement by Rail
Container Business in India
Rail share declined from 89% to 30.1% between 1950to 2007 while during this period Road
share grew from 11% to 61%.During 1988, Indian Railway with the objective of developing
multimodal transport and logistics support for India’s domestic and international
containerized cargo and trade set up ‘Container Corporation of India Ltd (CONCOR)’.
CONCOR’s core business is characterized by three distinct activities-carrier, terminal
operator and warehouse/CFS operator CONCOR’s core business is characterized by three
distinct activities-carrier, terminal operator and warehouse/CFS operator. Container
Corporation was the sole operator on Indian Railways to carry container on railways till
2007.
With increase in trade volumes and phenomenal growth of container traffic in India and
increase in competitions in goods traffic earning from road, Indian Railway felt the need to
augment transportation over rail network.
Following was the Trend of Container traffic movement in India up to 2006.5
Figure 4: CONCOR’s Performance
5 http://www.concorindia.com/corpFigure.asp
0
500000
1000000
1500000
2000000
2500000
TE
Us
Year
Domestic
International
Total
Expon. (Total)
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Multi model transportation
Multimodal transportation is a kind of transportation where delivery of goods is conducted by
several various modes of transport. In so doing, modes of transport are used in different
combinations in accordance with a certain situation and assigned tasks. By multimodal
transportation, your goods can be transported to railway station by motor transport, then
transported by railway, and subsequently transported also by motor transport from the
railway station to the destination point. Multimodal transportation is mostly used for goods
transportation between continents and when there is no possibility to use just one mode of
transport.
Advantages of multimodal transportation are:
1. Immediacy of goods delivery by combination of different types of transport (motor,
marine, railway and air transport)
2. Possibility to ensure access to the most remote parts of the world
3. Efficiency in conditions of limited delivery time
4. Minimization of logistic expenses of a company
Figure 5: Multimodal transportation
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Intermodal Transportation
Intermodal transport is a particular type of multimodal transport, wherein the goods are
moved in one and the same loading unit, for example: containers. Intermodal transport uses
more than one mode of transport, however, since the loading unit remains the same, the
goods being transported, are themselves not handled each time there is a change of mode.
Advantages of Intermodal Transportation
1. The method reduces cargo handling.
2. Improves security.
3. Reduces damage and loss.
4. Allows freight to be transported faster.
Figure 6: Intermodal Transportation
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Background
The Minister of Railways (MR), in his budget speech on 26th February, 2005, announced that
The Ministry of Railways (MoR) and the Government of India would permit private
operators to run container trains. It was, therefore, decided to open rail container freight
segment to private parties through Public Private Partnership (PPP). At the time of this
announcement, all container train operations on Indian Railways (IR) network were being
carried out solely by Container Corporation of India Ltd (CONCOR), a listed subsidiary of
IR.(A brief background of CONCOR is given in Exhibit 1.). A policy to allow operators other
than CONCOR was also announced in 1994. The operators were to develop their own
terminals and rolling stock. Traffic was proposed to be moved by block rakes between Inland
Container Depots (ICDs) and gateway ports. However, the policy did not clearly bring out the
role of CONCOR vis-à-vis new operators and the guidelines were found to be restrictive in
implementation. Central Warehousing Corporation (CWC) obtained clearance to run
container trains in 2001.
It, however, waited till 2005 to take the matter forward. In November 2004, IR also permitted
Pipavav Rail Corporation Ltd (PRCL) to run container trains between Pipavav port and 15
hinterland CONCOR ICDs spread across the country. However, there was resistance from
CONCOR and prior to commencement of activities; the move was reversed when MoR
decided to come up with a separate policy. As the policy was not sufficiently attractive and
prospective entrants were apprehensive of CONCOR’s role, it failed to draw any response. It
was in this context that the MR announced a fresh initiative in his budget speech of February
2005, “With the globalization of the Indian economy and spurt in imports and exports, the
container traffic is expected to grow exponentially.
It has been assessed that the growth will be of the order of 15%. In order to meet the
growing demand for container trains, organizations other than Container Corporation of
India will also be considered for movement of container traffic.6” This announcement was
widely attributed to directions from the Prime Minister’s Office after the new government
assumed office in May 2004.
6 http://articles.economictimes.indiatimes.com/2005-02-26/news/27493558_1_indian-railways-freight-
growth-originating-passenger-traffic/4
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Subsequent to the budget announcement, in a meeting of the Committee on Infrastructure
(CoI) held on 12th May, 2005, under the chairmanship of the Prime Minister, it was decided
that MoR would prepare a scheme to allow entry to various operators. The target date for
finalising the scheme was set at August 2005. In the meanwhile, Member (Traffic), Railway
Board (MT) (also the ex-officio Chairman of CONCOR) framed a detailed policy but the MR
desired that the subject be studied by a professional agency. Accordingly, RITES, a
multidisciplinary consultancy organisation under the administrative control of MoR, was
awarded the study on 10th June, 2005. A brief background of RITES is provided in Exhibit 2.
The scope of work given to RITES, inter alia, included:
1. Identification of capacity constraints on container carrying routes of IR’s
network
2. Formulation of policy guidelines and other requirements for selection of new
operators
3. Assessment of minimum level of investments to be made by prospective
operators in rail
4. Infrastructure (other than terminal and rolling stock) and likely return thereon
5. Examination of desirability of levying license fee from the prospective operators.
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RITES Report
Projections and assessment
RITES submitted its first draft to the (Railway Board) RB on 18th July, 2005. This was
followed by the draft final report on 2nd September, 2005, before finalising it on 15th
September, 2005 in consultation with the RB. RITES projected 30% of the total container
traffic to be carried by IR in 2014-15, starting from their current estimate of 21%. In respect
of port related traffic for IR, this implied an increase from less than 1 million TEUs in 2004-
05 to about 4 million TEUs projected for 2014-15. RITES also studied 28 container rail
corridors to assess the capacity constraints likely to arise in meeting the growing traffic
requirements. RITES report identified a number of sections which were or are likely to
become saturated on each corridor. It also assessed the capital costs required for alleviating
such constraints. RITES recognised that IR was planning to develop Dedicated Freight
Corridors between Delhi-Mumbai and Delhi-Kolkata and, once completed, these two
corridors would create adequate capacity.
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Market feedback
RITES interacted with several players for market feedback. It was reported that the users felt
that there was no benchmark available to evaluate CONCOR’s services as they had no
alternative. It concluded that “perhaps CONCOR has reached its optimal level of operations
and in the absence of any competition, may not be able bring about the desired level of
efficiency and growth in its container business”. Almost all agencies welcomed the initiative
to allow entry of new operators in container train movement as they expected competition in
container train operation to benefit shippers. Some of the suggestions were:
• A level playing field vis-à-vis CONCOR is essential.
• IR must provide guarantee of transit times and introduce a system of penalties and
rewards.
• The entire network ought to be available to the private operator rather than limiting
them to one segment or a portion of the network.
• Since investments are required in terminals and rolling stock (wagons), they should not
be asked to invest further in rail infrastructure.
• If a licence fee is charged, it should be nominal and preferably included in the haulage
charges.
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Recommendations by RITES
Entry requirements
For the new container operators, RITES argued that “the requirements should be such that it
deters frivolous contenders.” RITES recommended the entry requirements based on
background and financial capability in terms of networth/turnover, availability of rail access,
level playing field, trade perceptions and expectations, likely share of rail in container freight
market and safeguarding IR interest. RITES stated that the guidelines proposed in the report
were meant for export and import traffic only. On rail access, RITES recommended that the
interested operator must have proper rail access (terminal) in the hinterland location for
handling container trains. Alternatively, the operator should have an agreement or MOU with
an existing ICD for its use. In the absence of either option, the operator should undertake to
develop an ICD in two years’ time. Recognizing that no one other than CONCOR might have
rail linked facilities, RITES recommended that IR should encourage the development of
common user rail terminals with private sector participation. The rates charged by such
common user facilities could be regulated as was the practice in UK. Thailand also had a
common user facility operated by the State Railways.
Regulating entry
For entry of operators, RITES classified and grouped the ports based on existing and
anticipated traffic volume. The most important corridor of JNP/Mumbai Port – Delhi Area
was classified as a separate category. RITES proposed that any new entrant would have to
select one or more routes from among the categories on which it wanted to operate. Table 1
gives the areas of operation of each category. RITES recommended varying minimum traffic
commitment and entry fee for each route depending upon the category to which the route
belonged (Table 1). The minimum traffic commitments might be achieved by the new entrant
within one year and in case of any shortfall, the operator would be liable to pay IR the
haulage charge based on the minimum commitment. RITES recommended regulating the
entry of new operators owing to capacity limitation on certain corridors serving the ports,
with entry fee based on bids. The highest bidder would be allowed access to a particular
route. As and when the capacities became available, the existing operators could be given
opportunity to offer additional traffic or new operators might be allowed by IR on the same
route.
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Table 1: Entry Fee Proposed by RITES
Area of Operation
Minimum
Trains per
Week
Traffic level
most likely to
materialise
Proposed
Entry Fee
(Rs. Crore)
I
JNP/Mumbai Port–
Delhi Area rail corridor
7
130
II
Rail corridors serving
JNP and its hinterland
other than Delhi Are
4
6
70
III
Rail corridors serving
Pipavav, Mundra,
Chennai, Ennore, Vizag
and Kochi and their
hinterland
3
5
45
IV
Rail corridors serving
ports of Kandla, New
Mangalore, Tuticorin,
Haldia/Kolkata,
Paradip and
Mormugao and their
hinterland
1
2
15
20 | P a g e
RITES proposed the entry fee on the basis of twin criteria, namely, the ‘growth in the rail
share of container traffic, with adequate financial gains to IR’, and ‘to present an
attractive financial scheme to prospective operators, providing a reasonable return on their
investment’. The investment would include rolling stock and terminal, and the entry fee. The
entry fee was worked out based on expected revenues while allowing 10-12% return on
investment. However, no details for the estimated revenue and costs were provided in the
report. According to the report, “the entry fee will be charged on the basis of per route
under each category. For example, category II routes such as Ludhiana-JNP or
Ahmedabad-JNP will be treated as separate routes for the purpose of entry fee. In case an
operator wants to operate on another route (other than the original route) in the same
category, he will be required to pay 50% of the entry fee for that category. However, in case
the operator decides to run container trains in a different category other than the original
category, he will be required to pay the full entry fee for the new route under the said
category”. To make the scheme attractive, it proposed entry fee in stages. 30% was to be paid
on receipt of permission to operate container trains; 30% at the end of one year of
commercial operations; and 40% at the end of three years. RITES proposed that in case the
traffic levels exceeded the level for which the entry fee was assessed, the operator should
share additional revenue with IR. In case an operator was to run a regular additional train, he
should pay 10% extra haulage charge to IR. If the additional train was run occasionally, the
operator should pay 15% extra haulage charge.
Commitment to and from IR
RITES spelt out the expected commitments from new entrants. These included, amongst
others, adherence to accounting and operational procedures, approval of designs,
maintenance of rolling stock and access to premises. RITES also outlined certain
commitments required from IR to enable the success of the policy. It proposed that IR should
consider making unused assets, such as sheds and sidings, and surplus land available to the
private parties on lease on reasonable terms. This was seen as important for quick entry.
21 | P a g e
Planning Commission’s concerns on RITES’ proposals
Inter-ministerial meeting
Subsequent to award of the study to RITES, in a meeting taken by Principal Secretary to the
Prime Minister in June 2005, it was decided that inter-ministerial consultations were required
before the new policy was finalised. Accordingly, in a meeting on 6th October, 2005, the
RITES report was discussed. In the meeting, the Advisor to Deputy Chairman, Planning
Commission (ADC) also circulated a paper on the policy for container rail services including
comments on RITES’ proposals. The debate essentially revolved around issues relating to
‘entry barrier’, ‘level playing field vis-à-vis CONCOR, the incumbent’, and ‘protection of
user interests’.
Entry barriers
The Planning Commission (PC) representative in the meeting described the entry fee
proposals as a ‘double jeopardy’ since CONCOR already had monopoly power and,
therefore, enjoyed first mover advantages. As compared to CONCOR which was well
entrenched, the new entrants would not only have to take risks associated with large
investments in rolling stock and terminal(s), business development, demand growth and
competition, they would also have to commit to pay an entry fee upfront. In case they had to
bid for a constrained route, they might also face the ‘winner’s curse’. Further, the issue of
increased risks due to the charging of route specific entry fee within a single category was
also discussed. All this would result in creating potent entry barriers for prospective
operators. Most of the members of the committee agreed that IR should come up with an
alternative proposal if the objective was to protect its revenues. Such a proposal should
ensure level playing field and should not end up creating entry barriers for protecting
CONCOR’s monopoly.
Level playing field
The representatives of Ministry of Commerce and Industry (MoCI), and PC were
apprehensive of possible discrimination against new entrants and in the interest of a level
playing field, suggested that, “A provision should be included in the guidelines to ensure
that private operators are treated at par with CONCOR. This is considered necessary
because CONCOR, the track and the locos were all owned by MoR and there are risks of
discrimination against the private operators.”
22 | P a g e
Protection of Users’ interest
The meeting also discussed the issue of likely competitiveness in the container services and
protection of users’ interest. The representatives of the MoCI and the Department of Shipping
(DoS) expressed the fear of cartelization and felt that users’ interest be protected by a
regulator. The representatives of MoR and PC, however, felt that competition would
automatically ensure fair charges for the users. It was also felt that the Competition
Commission of India could act as the regulator in case of any grievance of users. Currently,
prices were set unilaterally by CONCOR, possibly keeping in mind competition from the
road sector.
The meeting decided that the concerns expressed by the participants be incorporated in the
paper circulated by the Advisor to Deputy Chairman, Planning Commission (ADC) and
circulated afresh. Based on the revised paper and with its own comments, the MoR would
organize an inter-ministerial meeting. Subsequently, a meeting with stakeholders would also
be organised prior to finalisation of the policy.
23 | P a g e
Revised paper by the PC
The revised paper was circulated by ADC on 10th October, 2005. It noted that the fast pace
of market growth warranted augmentation of capacity on a competitive basis. It would help
not only in improving efficiency of transportation and of port infrastructure, but also in
increasing the traffic carried by IR, thereby resulting in higher earnings. The paper went on to
analyze the implications of RITES’ proposals on promotion of competition as the policy
objective.
Entry fee
To promote competition in the expanding market for container movement, the paper argued
that imposition of entry fee as recommended by RITES would hurt competition as new
entrants would begin with several handicaps. Not only the case for entry fee was weak, but
also the quantum of fee proposed was high. MoCI, DoS and PC were all opposed to
imposition of entry fee, especially through bidding in respect of congested routes where
demand exceeded available capacity. Promotion of competition was also in the interest of IR
as it would increase the share of container movement by rail as compared to road. This would
result in higher revenues for IR through haulage charge. If the idea of entry fee was
motivated by the concerns relating to increased investment requirement by the IR due to rise
in traffic volumes, then it should impose higher haulage charge or cess uniformly from all
players rather than charging entry fee from new entrants. The paper also examined the
proposal of entry fee from the perspective of thwarting entry of ‘frivolous players’. It pointed
out that any new entrant would have to own or lease a rail linked terminal and. rail flat
wagons for carrying containers, all approved by IR. The new operators would thus be captive
customers of IR and would have invested considerable sums before commencing business. It
was proposed that a registration fee/security deposit of Rs 1 lakh per rail flat wagon would be
payable by the operator for 100 wagons. 90% of this amount would be refunded as and when
the wagons enter commercial service. Thus, there would be no risk of entry of frivolous
players. Moreover, frivolous players are not attracted to businesses where no capacity rights
can be created and sold off or used for exercising monopoly power. The paper suggested
doing away with entry fee and that the new entrants are allowed transportation of containers
over the entire network of IR without being tied down to a specific route, subject to
operational feasibility. It also objected to demanding minimum traffic guarantees from the
operators since IR would not incur any opportunity cost or capacity charge if an operator
failed to provide traffic.
24 | P a g e
Level playing field
‘First come first served’ despatch of trains
The paper emphasised that the terms and conditions offered to CONCOR should be
formalised and be the same as those offered to new entrants. In particular, the paper
suggested that the dispatch of container trains should be on a ‘first come first served’ basis
subject to operational contingencies and constraints in a transparent manner to allay the fears
of discriminatory treatment in favour of CONCOR. It stressed upon the need to ensure a level
playing field in terms of owning/leasing rail linked terminals, utilisation of unused IR
facilities, haulage charges, documentation and legal liabilities. It also suggested transit
guarantees that IR should offer to the operators to be enforced through suitable
premium/penalty payment clauses. Timetabled paths (a departure from the normal IR freight
operations) were also recommended. The operators were to be given full freedom for setting
tariff vis-à-vis their customer (subject only to the Competition Commission against
cartelisation or restrictive trade practices) and paying for damages. However, reimbursement
from IR to the extent of IR’s liability would be subject to the IR Act.
ADC sent another note on 22nd October, 2005 with further comments on the RITES report.
In addition to arguments made in the paper, the note critiqued specific suggestions of RITES
related to entry criteria, entry fees and revenue share, among others (Exhibit 3). It argued in
favour of opening up the entire network to the operators, and to extend the scope from just
export import cargo to include domestic cargo.
25 | P a g e
Response from the RB
The RB responded to some of the concerns raised on the RITES report in a letter dated 18th
October, 2005. According to the RB, the IR reserved the right to determine the freight rates
including haulage charge. Although the freight rates had been falling, IR was the final
authority in fixing the rates. Similarly, IR was not in a position to give guaranteed transit
times and departures according to a fixed time table for the proposed private freight trains.
Such commitments had not been given to any operator including CONCOR. The IR might be
in a position to consider guaranteed transit time and fixed timetable on the Dedicated Freight
Corridors. The letter mentioned that since many routes were carrying as much as 150% of
their daily capacity in terms of number of trains, they will be able to permit a maximum of
1 to 7 trains per week per operator and that too for a limited number of operators
depending upon the available capacity of that route. It argued that in case too many
operators were interested in a route, the selection may be best done by bidding as in other
sectors. As regards the entry fee, RB argued that entry fee should be paid only by the new
entrants. Examples from the telecom sector were cited by the RB, wherein “though the new
entrants were asked to pay for a license fee, the same was not levied on the existing
operators: DOT and MTNL. Thus CONCOR should not be liable to pay an entry fee”.
Meeting with stakeholders
A meeting with stakeholders was called on 17th November, 2005. Prior to this meeting, PC
had circulated a questionnaire to the stakeholders for inviting their opinion on entry fees, the
categories of routes, the qualification criteria, the method of allocation of trains when the
capacity was limited, and on the treatment of CONCOR with regard to entry fees. They were
also given access to the RITES report. A variety of opinions emerged, but it was clear from
all the private parties that no special treatment by way of exemption of entry fee or any other
operational preference should be given to the incumbent, CONCOR.
26 | P a g e
Summary of responses received from stakeholders
Adani Logistics (a very large logistics operator with its own port ICD and rail operations)
suggested that:
I. Entry fee was justified but not as high as was recommended by RITES, future freight
payment of two years should be adjusted against 50% of the entry fee, and credit must be
given for investments already made.
II. Surcharge based on volumes was not good since multiple charges under various heads
would complicate the commercial operations.
III. No more than four players on any given route and instead of bidding for selection, both
technical and financial aspects need to be considered.
IV. Any party that owns 450 flats (i.e., 10 trains) should be considered an accredited operator
with preference in selection given to port/rail track company, which also had trading and
ICD operations,
V. ‘First come first served’ basis of train dispatch,
VI. Level playing field with CONCOR
Kutch Railway Company (a JV of the MoR, Kandla Port Trust, Government of Gujarat and
Gujarat Adani Port Ltd) suggested that
I. JVs of IR need not pay the entry fees, but a charge of Rs 5 lakh per flat may be levied on
all,
II. Each route may be restricted to four to five operators,
III. The stringent technical criteria were not good but those who had or could augment rail
capacity should be given credits,
IV. ‘First come first served’ basis of train dispatch be followed.
27 | P a g e
Central Warehousing Corporation (CWC), a public sector entity, had already invested in
34 CFSs/ICDs and was handling 0.9 million TEUs despite not having been allowed entry into
container train operation. Its application since 2001 had been pending with MoR. It had been
allowed rail linked ICD at Loni (near Delhi) and rail linked CFS near JNP, Mumbai under a
1994 policy of MoR. In its response to the questionnaire, it felt that
I. New entrant should have at least 10 years’ experience in container related businesses, an
annual turnover of Rs 500 crore, investment of Rs 100 crore in container related
infrastructure, should be already operating ICDs/CFSs with 0.5 million TEUs handled, and
should be making profit for last five years. All these should be given equal weightage
II. No entry fee to be levied and if IR requires resources, it can levy a surcharge on haulage
charge uniformly. In case an entry fee is insisted, the investment in rail infrastructure to be
set off against the proposed entry fee,
III. The permission to new entrants should be for five years,
IV. No rationing of number of trains allowed per operator and no operator including the
incumbent should be allowed more than 50% on a route.
NYK Line, one of the participants wanted clarification on whether the policy would only be
for export import traffic or for domestic traffic. The NYK had also proposed that if for a
“particular route the number of operators that may be permitted is to be based on the
capacity available, then a bidding process ought to be undertaken in which the companies
will quote how much deposit they would make for being selected for operating trains. The
total deposits of the successful applicants would be kept with an entity like IRFC/RVNL etc
who would pay to the applicants, interest on the balance portion of deposit at a predetermined
rate which should be lower than the borrowing rate. This deposit will progressively get offset
against haulage charges payable when the applicant starts running container trains”.
Among other stakeholders, Shipping Corporation of India (SCI), Sattva, Gateway and JM
Baxi either supported no entry fee or fee as deposit to be refunded completely. P&O Ports,
CM & CGM Global Pvt Ltd, NYK Line and PRCL supported lower entry fee as compared to
RITES proposals.
28 | P a g e
MAERSK, an international player in the business, suggested that
I. The concession agreement should be for 30 years because of the long life of the assets.
II. IR should specify the available capacity on a route or corridor in terms of number of trains
and the maximum and minimum number of operators on a route.
III. The selected operators should have experience in train operations or should have an
experienced operator as part of the consortium, and financial capability to undertake
investments during the tenure of concession.
IV. No entry fee be imposed and if imposed, it should be set off against haulage charges
payable to IR over a period of time.
V. IR should provide railway land at reasonable cost for development of rail sidings and
allow common user rail sidings by the operators through SPVs (special purpose vehicles)
so that each of they do not have to develop sidings independently.
VI. The tariff on haulage and all other charges be such as to enable operators to effectively
compete with road; the idea of 10-15% share of the railways in additional traffic revenue
is not justified and asked for the financial model used by RITES to be revealed and
included in the RFP/RFQ.
VII. A level playing field visa-vis CONCOR would be essential.
29 | P a g e
IMG meeting and the draft policy
In the Inter Ministerial Group (IMG) meeting on 24th November, 2005 with Chairman, RB, it
was decided that the draft policy be finalised taking into account the views of stakeholders
and the comments received from members. In a departure from RITES’ proposal, domestic
movement was added to the categories. The four categories as proposed in the RITES report
were, however, retained. According to the draft policy, any new entrant for category I routes
would have to pay a non-refundable registration fee of Rs. 50 Crore. This would enable the
entrant to operate on all routes including category I routes. In case the entrant wanted access
to routes other than category I routes, the non-refundable registration fee would be Rs 10
Crore for each category. This fee would be payable at the time of application and would be
returned without interest in case the applicant was found ineligible. The draft policy did not
envisage any restriction on routes within a category or number of allowed trains. The
permission would be valid for 20 years and could be extended by 5 years on payment of fee
applicable at that time subject to satisfactory performance. The terms and conditions spelt out
in the draft policy laid down that the trains by the operators would be despatched on ‘first
come first served’ basis in a non-discriminatory manner. The rolling stock would be procured
by the operators based on IR approved design, and it would have to be inspected by IR as per
the rules in force. Most of the other operational terms and conditions in the draft policy were
similar to the RITES proposals.
30 | P a g e
The final policy
After the announcement of the draft policy, ADC, in a letter dated 20th December, 2005 to
Chairman, RB forwarded PC’s comments on the draft policy. As compared to the draft
policy, the following major changes were made and explicitly announced:
• The net worth or turnover criterion for a company was reduced to Rs 100 crore from Rs
250 crore.
• For operations beyond 20 years, the extendable period was increased to 10 years from 5
years.
• The process of registration as well as train operations would be uniformly applicable to
all including CONCOR. The trains were to be dispatched on non-discriminatory ‘first
come first served’ basis.
Table 2 gives the areas of operation and registration fee for each category as was announced
in the final policy.
31 | P a g e
Table 2: Areas of operation and Registration fee
Category Area of Operation Registration Fee
(Rs. Crore)
I
JNP/Mumbai Port – National Capital
Region rail corridor &beyond. This
category will also include all domestic
traffic.
500
(automatically includes all
four categories)
II
Rail corridors serving JNP/Mumbai
Port and its hinterland in other than
National Capital Region and beyond.
This category will also include all
domestic traffic except on category I
routes
100
III
Rail corridors serving the ports of
Pipavav, Mundra, Chennai/Ennore,
Vizag and Kochi and their hinterland.
This category will also include all
domestic traffic except on category I
routes.
100
IV
Rail corridors serving other ports like
Kandla, New Mangalore, Tuticorin,
Haldia/Kolkata, Paradip and
Mormugao and their hinterland and
all domestic traffic routes. This
category will also include all domestic
traffic except on category I routes.
100
Other than the above changes, the final policy contained all other provisions of the draft
policy. On 5th January, 2006, the final policy was announced in a press conference by the
MR.
32 | P a g e
Policy to Permit Various Operators to Move Container Trains
Policy to permit rail linking of Inland Container Depots (ICDs) by private parties other than
M/S Container Corporation of India Ltd. (CONCOR) and allowing them to move container
trains on the same lines as CONCOR for both international and domestic traffic has been
under consideration of Ministry of Railways (MoR) for quite some time. In pursuance of the
decisions taken on this issue, revised policy guidelines in supersession of earlier letter
No91/TC (M&S)/6/2/vol II dated 30.11.94 shall be as under:
Eligibility
The scheme is open to all registered Indian public/private sector companies/persons either
individually or in joint venture. It will include Indian registered companies of foreign entities.
EXIM Traffic
The prospective operator should have a suitable access to a rail linked ICD with adequate
handling capacity in the hinterland/inland location for handling of container trains.
OR
The operator should enter into an agreement with an existing rail ICD operator/rail terminal
operator for using his facility for container train operations, within six months of obtaining in
principal approval from MOR.
OR
The operator gives an undertaking that he will develop his own ICD with rail facility within a
period of three years from the date of in principal approval to operate container trains.
33 | P a g e
Domestic Traffic
The prospective operator should have a suitable access to two rail linked ICDs with adequate
handling capacity in two hinterland/inland locations for handling of container trains
OR
The operator should enter into an agreement with an existing rail ICD operator/rail terminal
operator for using his facility at two locations for container train operations, within six
months of obtaining in principal approval from MOR.
OR
The operator gives an undertaking that he will his own ICD with rail facility at two locations
within a period of three years from the date of in principal approval to operate container
trains.
The applicant should have experience of the following, or should be engaged in any of the
following activities:
• Transport
• Trade and Commerce
• Infrastructure
• Handling of Goods/Cargo
• Port/Land Terminal operations
• Logistics
• Warehousing
• Manufacturing
• Leasing
34 | P a g e
Regulation of Rail Container Operations
In order to regulate the entry of new rail container operators on IR network, various routes
have been grouped into four categories largely based on the existing as well as anticipated
traffic volumes on different rail corridors serving gateway ports. These categories are as
follows:
Category – I: JNP/Mumbai Port - National Capital Region Rail Corridor and beyond.
This category includes all existing/future ICDs serving JNP/Mumbai Port in National Capital
Region like Tughlakabad, Dadri, Gurgaon, etc. This will also include all destinations reached
via National Capital Region like Dhandari Kalan, Moradabad etc. This category will also
include all domestic traffic.
Category – II: Rail corridors serving JNP/Mumbai Port and its hinterland in other than
National Capital Region and beyond.
This category includes all existing/future, ICDs serving JNP/Mumbai Port at locations other
than those covered in category I. This category will also include all domestic traffic except on
category I routes.
Category – III: Rail corridors serving the ports of Pipavav, Mundra, Chennai/Ennore, Vizag
and Kochi and their Hinterland
This category includes all existing/future ICDs serving these ports. This category will also
include all domestic traffic except on category I routes.
Category – IV: Rail corridors serving other ports like Kandla, New Mangalore, Tuticorin,
Haldia/Kolkata, Paradip and Mormugao and their hinterland and all domestic traffic routes
This category includes all existing/future ICDs serving these ports. This category will also
include all domestic traffic except on category I routes.
35 | P a g e
Financial Capabilities
i. In case of an individual or a single company, either the turnover or the net worth should be
a minimum of Rs 100 crore.
ii. In case a number of companies form a consortium for the purpose of operating container
trains, each constituent member should have either annual turnover or net worth of at least
Rs 50 crore
iii. Companies which have been declared sick under SICA Act will not be eligible to
participate in the proposed scheme either singly or in association with the other companies
for container train operation.
Approval Process
i. If the proposed operator has to set up a new ICD then for rail linking an Inland Container
Depot (ICD) he must obtain the requisite permissions from the concerned authorities of
the Government of India for setting up and operating the ICD within six months.
ii. The proposed operator should submit his request in, writing to MOR indicating therein his
legal identity, intended, scope of operations for the next five years atleast, proof of
complying with various eligibility criteria indicated in this' policy, and willingness to
abide by the terms and conditions laid down in the policy and as amended from time to
time.
iii. Based on the documents furnished and clarification, if any, Railways will give their ‘in
principle’ approval. In case the prospective operator fails to indicate his readiness to
operate his container trains to Railway's satisfaction within 3 years of grant of ‘in principle
approval’ it will be deemed to have lapsed unless prior extension is given by railways at
its sole discretion.
iv. Before actually commencing operations, the operator will enter into an agreement with the
Railways containing the detailed operating and accounting procedure: including the
ownership of the new lines/assets and other relevant details. The agreement will have
provision for suitable arbitration procedure for resolving any dispute.
v. The scheme will be open for one month every year.
36 | P a g e
Registration Fee
i. At the time of submission of request to run container trains every applicant would be
required to deposit a non-refundable registration fee of Rs 50 crore for applying for all
categories of routes including category I and Rs 10 crore for each individual category of
routes except category I. Applications only for category I routes will not be accepted.
ii. The registration fee of applicants who are not found eligible will be refunded without any
interest.
Modalities of Granting New Licenses
i. In case the successful operator opts for category I, he will get a flexible permission to run
trains between any pairs of points in the entire country. This will include permission for all
other categories also. In case the operator applies for a particular category (except
category I), he will get permission to run trains between any pairs, of points in that
category only for EXIM traffic and in domestic traffic for all routes, except those in
category I.
ii. There will be no limit on number of trains on any of the routes.
Terms and conditions
i. The container trains of various operators will normally be dispatched on a no
discriminating manner on 'first come first served' basis, subject to any operational
exigencies and/or restrictions from time to time.
ii. ICDs will be treated like private sidings with the extant rules and procedures laid down
for private sidings' applying mutatis-mutandis to them.
iii. Land and other related facilities required for railway operation and the .track connecting
the ICD to the nearest rail head will have to be provided by the operator at his own cost.
However, if railway land is available he can apply for the same on the normal terms and
conditions laid down by MOR.
iv. For movement of containers, the operator will procure his own rolling stock/containers
according to RDSO approved design. The rolling stock will be inspected as per rules in
force.
v. Loading and unloading of containers in the ports/ICDs shall be responsibility of the
operator.
37 | P a g e
vi. Maintenance of track will be done by the operator at his own cost, with IR being paid for
inspection/supervision according to the prescribed prevailing rates. Maintenance of rolling
stock will be done by IR, for which the prescribed charges will be recovered from the
operator.
vii. The operator will allow IR to enter any of its premises for inspection and for scrutiny of
documents pertaining to rail-related operations and provide necessary and reasonable
facilities for doing so.
viii. The operator can carry all goods subject to conditions specified in the goods tariff, red
tariff and under provision of Indian Railway Act and any other instructions issued on the
subject by MOR from time to time.
ix. The movement of containers/flats will only be in block rakes of prescribed standard sizes
for different types of wagons as notified by the Railways from time to time.
x. Information System: IR's Freight Operation Information System (FOIS) will also cater to
the party's requirements for an integrated management and operations information service.
The operator will provide all relevant data as required by FOIS. He will be given 'read
only' access to this system at reasonable cost.
xi. Haulage charges: The operator will pay to the railways haulage charges applicable
uniformly to all operators, as notified/fixed by the Railways from time to time.
xii. For payment of haulage charges the provisions of Commercial Manual and other
guidelines issued from time to time will be followed.
xiii. Documentation work, including issue of Railway Receipt (RR) for haulage charges will be
done by Railway staff posted by Railways in the ICD. The cost of such staff will be borne
by the operator and will be charged separately.
xiv. Operator Tariff: the operator will charge his customers for rail haulage, terminal handling:
ground rent etc. on a market determined basis and railways will not exercise any control
over such pricing.
xv. All operations like shunting, placement, withdrawal, formation etc. within the ICD will be
done on party's advice and party will be charged separately for such services: as per the
agreement signed between the two.
xvi. Demurrage: There will be no demurrage charges. Railway will however levy stabling
charges as per rates notified from time to time in case rolling stock belonging to the
operator is stabled on IR network.
xvii. Normal rules in respect of claims will be applicable according to the Indian railway Act,
1989.
38 | P a g e
Period of Validity of Permission for Operating Container Trains
i. The validity of permission will be for a period of 20 years from the date of operation of
container trains by the operator. The permission can be extended by 10 years to the same
party after expiry of the validity of permission subject to satisfactory performance and on
payment of the fee as applicable at that time, which will be decided by Railway Board.
ii. An operator will be permitted to exit from the market or transfer the permission to another
operator for container train operational subject to the latter fulfilling the selection criteria
and subject to prior approval of the Ministry of Railways. This permission will however,
be granted only one year after rail borne container traffic has commenced from his ICD
Cancellation of the Permission and Dispute Settlement
i. In case the operator does not follow the rules laid down by Railways for safety of goods
carried or of railway property or any rules laid by the Government for movement of
containers the operator can be penalized as notified from time to time or permission of the
operator can be cancelled by giving one month's notice.
ii. In case the operator wants to terminate operation of container trains prematurely he will
give the request in writing to the Ministry of Railways with three months’ notice.
iii. On cancellation of the permission no part of the registration fee will be refunded to the
party.
iv. In case of any dispute on this issue between the operator and the Railways the decision of
the Railways will be final.
v. Any dispute between the operator and the railways of this issue will be resolved within
the framework of the agreement to be signed between the two as per para 3.4 of the policy.
vi. For resolving disputes on the issues pertaining to the siding for the ICD, claims for
damages, haulage charges, etc. The operator can seek redressal by resorting to the relevant
provisions of siding agreement, Railway Claims Tribunal or Railway Rates Tribunal also.
vii. This policy is in supersession of all earlier decisions on running of container trains on IR
and shall be in effect from the date notified in the Official Gazette of India. Operators
were invited to register from 16th January to 15th February, 2006. The response was
‘overwhelming’ as per the MoR. In the first round (February 2006), 14 operators including
the incumbent CONCOR signed agreements with IR to set up container train operations.
10 of these permissions were sought for operating on the entire network of IR including
category I routes. Collectively, the operators had deposited a total of Rs 540 crore with the
MoR towards registration fee.
39 | P a g e
Table 3: Entrants
Sr. No. Name of
Company
Promoter
Group
Promoter’s
Other
Activities
Category
Licence Fee
Paid (Rs
Crore)
1 Adani
Logistics Adani Group
Ports,
container
terminal,
railways,
CFS
I 50
2
Central
Warehousing
Corporation
(CWC)
PSU under
Ministry of
Consumer
Affairs, Food
and Public
Distribution
Warehousing,
CFS I 50
3 CONCOR
PSU under
Ministry of
Railways
Incumbent I 50
4 Gateway Rail
Freight
Gateway
Distriparks CFS I 50
5
Emirates
Trading
Agency
Emirates
Trading
Agency
Shipping and
port services I 50
6
Hind
Terminals
and MSC
Agency
Hind
Terminals
(subsidiary of
Sharaf Group,
UAE),
Mediterranean
Shipping
Company
(Geneva)
Shipping,
freight
forwarding
I 50
40 | P a g e
7
India
Infrastructure
and Logistics
APL India
(subsidiary of
NOL,
Singapore),
Hindustan
Infrastructure
Project and
Engineering
Container
shipping,
infrastructure
entrepreneur
I 50
8
Container
Rail Road
Services
DP World
Ports,
container
terminal
I 50
9
Reliance
Infrastructure
Leasing
Reliance
(ADAG)
Industry in
general I 50
10
Sical
Multimodal
And Rail
Transport
SICAL
Logistics Ltd
CFS,
container
terminal,
shipping
agency
50
11 Delhi Assam
Roadways
Delhi Assam
Roadways Trucking IV 10
12
Innovative
B2B
Logistics
Solutions
Bagadiya
Shipping and
Bothra
Brothers (P)
Ltd
Shipping
agency and
entrepreneur
IV 10
13
Boxtrans
(India)
Logistics
Services
JM Baxi &
Co
Container
terminal,
CFS,
stevedoring
IV 10
14 Pipavav Rail
Corporation
Gujarat
Pipavav Port
Limited and
Ports,
railways III 10
41 | P a g e
Model Concession Agreement
Process
Further issues were raised by stakeholders, knowing that a Model Concession Agreement
(MCA) would be prepared for finalisation of the contractual arrangement. These included the
time from which many of the obligations would be valid, including the date of ‘in principle’
approval or the signing of the MCA. Other issues were the selection of ports in each category,
the limited one month time window for applications, timing of payment of haulage charges,
service level issues like maintenance of wagons by IR versus other parties, scheduling of
trains including time guarantees, time windows for indenting and supply of locomotives, fees
and process for extension of contract beyond the initial 20 years. Stakeholders including the
RB also pointed to other dimensions that the MCA would need to address including financing
default and lenders’ rights, sale and transfer, termination rights, indemnity for IR, and dispute
resolution. In the 6th meeting of the Empowered Sub-committee of COI held on 13th
February, 2006, it was agreed that the MCA for container train operations would be examined
by an IMG chaired by Chairman, RB and comprising representatives of Department of
Economic.
Affairs, PC, Law Ministry, MoCI, and DoS, with a view to ensuring that the MCA was based
on best practices and addressed stakeholder concerns.
MoR sought the services of RITES for drafting the MCA. RITES, in turn, engaged a law
firm, and in consultation with MoR and PC, identified guidelines for formulating the MCA.
The draft MCA prepared by MoR went through a number of discussions and several issues
raised by the PC were resolved. Besides extensive inputs from PC coupled with deliberations
in the IMG, the MCA was subjected to several rounds of consultations with stakeholders. It
was also examined and vetted by experienced legal consultants. The IMG finalised the draft
MCA in its meeting held on January 2, 2007. The MCA received support from all
stakeholders including the 14 applicants. The MCA was approved by the MR and executed
with the applicants on January 4, 2007.
42 | P a g e
Content
The MCA addressed issues which were typically important for limited recourse financing of
projects, such as mitigation and unbundling of risks, allocation of risks and rewards,
symmetry of obligations between contracting parties, precision and predictability of costs and
obligations, reduction of transaction costs, force majeure, and termination. The MCA
reflected the final policy, which relied on creation of a level playing field, especially the
principle of ‘first come first served’.
Salient Features of the MCA
Concession Period: A concession period of 20 years had been proposed with a provision for
extension of 10 years on the same terms and conditions. The period of concession would start
from the date of signing of the agreement.
Categories of Routes: Four categories of routes had been defined for the purpose of grant of
concession. While Category I covered the entire rail network, the other routes were defined
on the basis of connectivity to specified ports.
Entry Fee: An entry fee of Rs 500 crore (US $12 million) had been proposed for the
Category I concessions and Rs 100 crore each for all other categories.
Operation of Trains: There was no restriction on the frequency and number of trains that the
concessionaire could offer to IR for haulage. Dispatch of these trains, however would be
undertaken on first-come-first served basis. The operator offering the train first would be
given preference for haulage of his train on a non-discriminatory basis, subject to availability
of path.
Termination: In the event of termination, the agreement provided for an optional sale of
wagons to IR. Termination payments had been quantified precisely as compared to the
complex formulations in most agreements of this nature. Political force majeure and defaults
by IR were proposed to qualify for adequate compensatory payments to the concessionaire
and thus guarded against any discriminatory or arbitrary action by the government.
Termination payment of an amount equal to 150% of the registration fee and 120% of the
depreciated replacement value of the concessionaire’s wagons had been proposed in the event
of default by IR.
43 | P a g e
Wagons and Containers: The concessionaire would own its wagons but not necessarily the
containers being carried on them. Provision had also been made for the concessionaire to
offer idle wagons to IR for use at mutually agreed terms and conditions. In the beginning, all
wagons would be maintained by IR and the concessionaire would provide the requisite
wagon examination facilities inside its rail terminal. Wagon maintenance charges would be
included in the haulage fee. As the industry matures, wagon maintenance could also be
undertaken by other approved entities.
Provision of Locomotives: Locomotives would be provided by IR to haul trains on a
non- discriminatory basis on payment of notified charges. For delay in supply of locomotives
beyond twelve hours, the IR would provide a rebate equal to 2% of the haulage charges
payable by the concessionaire.
Haulage Charges: Haulage charges for movement of containers on the railway network
would be prescribed by IR from time to time, and would be applicable uniformly to all
operators on a non-discriminatory basis.
Change in Technology: Provision had been made for accommodating changes in
technology. In the event that IR made any modification in technology or specifications, the
concessionaire was obliged to carry out the relevant modifications at its cost. If double stack
container operation Research and Publications was mandated for specific routes, the
concessionaire should, within a reasonable period of time, upgrade and/or acquire new
wagons and also equip its rail terminals for handling such trains at its own cost.
User Fees: The concessionaire was entitled to levy and recover freight charges from its
customers/users for the services provided. IR would not exercise any control over such levy
or collection of charges.
Restricted Commodities: The IR would haul the concessionaire trains upon payment of
prevalent haulage charges. However, from time to time, the IR would have the right to
specify certain commodities, which ordinarily move in railway wagons in trainload, as
restricted/notified commodities. These may be subjected to different tariff and conditions for
haulage. Presently, ores, minerals, coal and coke have been specified as notified
commodities.
44 | P a g e
Issues
Role of incumbent, CONCOR
Over the years, CONCOR had been responsible for developing the business of rail based
container movement in India. However, as noted by RITES in its report on the operations of
CONCOR, “There is no denying the fact that being a public sector subsidiary, CONCOR
has received support – and to some extent protection – from its parent organisation, which
has facilitated its growth in inter-modal rail operations.” For example, the tariffs payable to
IR for container movement were generally kept in line with the lowest commodity class of IR
and this helped CONCOR in pricing its services over 40% of its costs. Two initiatives by IR,
in 1994 and 2004, to open up this sector to operators other than CONCOR failed, primarily
due to lack of clarity on the role of CONCOR vis-à-vis the other operators, and CONCOR’s
own resistance. Having grown as a monopolist in the specific domain of rail based container
movement, even without explicit ‘machinations’ on the part of CONCOR, its large presence
is, to say the least, daunting. The proximity to IR, its parent, sets the context for conflict of
interest, putting pressure for significant ‘watch dog’ like efforts to move towards a level
playing field. The fact that a Rs 50 Crore licence fee payable by CONCOR was viewed as
unnecessary by IR reflects this, especially when CONCOR was already contributing over Rs
1,000 crore as haulage charges in 2006-07, and paying dividends on its profits to IR. While
efforts were taken to move towards a level playing field by making explicit the operating
discipline, the issues would be deeper due to the very proximity reflected in the ownership
and management control of CONCOR by IR.
45 | P a g e
Use of RITES as a consultant
The use of RITES as a consultant is again a reflection of the close relationship to IR due to
the nature of ownership and management control. Although RITES was able to leverage its
closeness to IR both in terms of knowledge and manpower for executing consultancy
assignments, its ability to advise the parent (IR) dispassionately on a matter of policy with
strategic implications was questionable. This was demonstrated in the initial framework of
taking capacity constraints as given, proposing entry to the highest bidder where the demand
exceeded the available capacity (thereby significantly increasing the costs of the new entrant
as compared to CONCOR), not addressing the level playing field issues with sufficient depth,
and viewing the scope of private operations only in export import traffic.
Role of PC and other stakeholders
As is evident from the policy making process, the role of the PC has been very significant in
providing an alternate point of view, often questioning principles that were taken for granted.
These are attributable to two major strengths that the PC brought in. The first is due to their
being an outsider to IR and the second due to their being closely involved with the public
private partnership processes in the infrastructure sector. Valuable perspectives were also
brought in by MoCI, DoS and other stakeholders including potential operators.
Role of IR
The variety of issues raised thus far brings out the distortions caused due to conflict in the
multiple roles of IR as licensor, regulator, service provider, and operator. Though the need for
private investment and competition is well recognised, this can only be achieved through
creation of a policy environment where competition and private sector participation are not
stifled by acts of resistance on the part of incumbents. In the instant case, the policy had
remained still born from 1994 until 2006. But for external participation in the evolution of
this policy, even the 2005 budget announcement may have met the same fate as the 1994
initiative. In particular, the external pressures on creation of a level playing field, especially
through the ‘first come first served’ policy were critical and catalytic in helping IR to roll out
the policy announcement of MR.
46 | P a g e
Findings
Introduction of competing entities has provided the much needed choice to users of container
services. It has led to expansion in capacity. The new concessionaires have acquired 89
container trains as compared to 189 trains owned by CONCOR as of September 2009.
Inability of IR to provide or promote common ICDs coupled with the restricted commodities
has constrained the growth potential.
The evolution of policy in this case sheds light on the nature of impediments that are faced
when the policy involves participation of the private sector in an area traditionally served by
the public sector. It is evident that incumbent resistance influenced the policy making
process. While the objective of the policy started with introduction of competition to bring
efficiency gains, the objectives quickly expanded to protection of IR revenues, and to
mitigate the effect of capacity constraints, resulting in entry barriers. As far as users were
concerned, competition would have been the best remedy to protect their interests as the
bargaining power of new entrants, given an active incumbent, would have been low. The
policy making at an entry stage also did not factor in risks, which would be imposed on the
private players if ambiguities and discretion of the public entities enhanced by a non-level
playing field could affect their use of investment and profitability. The policy process brings
out the significance of the role of the non-IR stakeholders in dealing with incumbent
resistance and the consequent entry barriers while ensuring a level playing field. Though
there is recognition of the ambiguities and distortions, the issue may be far from being
addressed. It would be essential to have an independent regulator on issues of service levels,
pricing, non-transparent collusion etc., primarily focused on the transactions between the IR
and the operators.
47 | P a g e
Recommendations
Entry Costs
In spite of the entry costs, 16 operators entered the market. Potential operators can get into
agreements with existing operators to minimise capital investments. Hence, issue of entry
costs may not be significant.
Pricing and Service Levels
There are two interfaces which are subject to regulation for pricing and service level
guarantees (i) IR vis-à-vis CTOs and (ii) CTOs vis-à-vis customers.
Between IR vis-à-vis CTOs, haulage increase, service guarantees, and commodity restrictions
have been the major areas of concerns. There has been no rationale for haulage increase.
Instead of restricting commodities, IR could have levied a different haulage for such
commodities. To improve the current pricing, other models could be evolved e.g. revenue
sharing between IR and CTOs, route based cost of haulage etc. More importantly, these
matters need to be overseen by an independent regulator to ensure stability and transparency
so that CTOs’ interests can also be protected. In the absence of such a regulator, IR exercises
its control with conflicting interests as licensor, regulator, service provider and operator.
Between CTOs vis-à-vis customers, there is already competition among 16 players and
market forces will ensure fair charges and services for customers.
Maintenance
There is a need for more number of wagon examination facilities in the country. A vision on
how these facilities should be developed and operationalized is a policy matter and needs
attention. Though CTOs are currently allowed to establish facilities in their premises, the
train examination is done only by the railway TXR staff which results in delays.
If IR develops the future facilities, it needs to decide on the appropriate numbers and
locations so that the turnaround time of rakes is not very high.
If CTOs invest in facilities, there should be a provision of hiring non IR TXR staff for train
examination. Training to such staff could be provided by IR and/or other agencies. The
certification should be done by IR.
48 | P a g e
Currently, the wagon examination charges are included in the haulage charged by the IR.
There is a need to unbundle the maintenance charges from the haulage since CTOs’ facilities
are also being developed. If the examination takes place in the CTOs' premises, they should
not have to pay the maintenance charge. For greater efficiency and to avoid containers from
being unloaded for examination, IR should provide pit lines and mechanical testing facilities.
Terminals
While the Greenfield terminal development is more capital intensive due to land prices,
modernization of brownfield terminals should be given priority. Common user development
for private sidings would have an advantage over captive since there are limited facilities as
of now. It is recommended that apart from IR and CTOs, independent third party
organization(s) should get into professional terminal management business. These
organizations should take over the existing underutilized private sidings, invest in up
gradation to enable container handling, and maintain on a regular basis. Any CTO that wishes
to use these terminals should pay the terminal access charge for each use. This model exists
in telecom sector in India, wherein telephone towers are owned and maintained by
organizations other than telephone operators.
For railway owned unused goods sheds, instead of IR developing and maintaining, a similar
third party approach is recommended for bringing in investment capital and operational
efficiencies.
49 | P a g e
Learning Outcomes
Container Corporation of India (CONCOR) being oldest player in container has become
incumbent in container business in India. Due its huge network presence on pan India
basis and available infrastructure it able to retain its customer. It also got the support of IR
for developing ICD in available free space of IR.
No Transit Time guarantee by Indian Railways, IR main priority is on passenger rail
transit time; this further restricts private player from assuring transit time to its customers
Documentation work, including issues of Railway Receipts (RR) for haulage charges will
be done by railway staff posted in ICD. The cost of staff to be borne by operator charged
separately
Maintenance of rolling stock will be done by IR in affiliated maintenance station which
restricted wagons movement on other routes.
Issues in formation of a policy
Logistic sector of India and different types of transportation model namely Multimodal
transportation & Intermodal Transportation.
50 | P a g e
Exhibit 1: CONCOR, the Incumbent
CONCOR was set up in 1989 as a wholly owned subsidiary of Indian Railways to transport
containers by rail in India. While it had a full time Managing Director, the ex-officio
Chairman was the Member (Traffic), RB. IR had ventured into containerized intermodal
movement for domestic traffic as early as 1966. They used 5 ton containers, which were not
an international standard. The market did not pick up and these containers were discontinued.
In 1981, IR handled the first ISO standard international container from Cochin port. This
business picked up and IR invested in ICDs. CONCOR took over the ICD assets of IR and
commenced operations in 1989.
CONCOR had worked over the last 15 years to register a large growth in the containers that it
handled. As India’s trade increased in the 1980s and most of its partners were already well on
to containerisation, it became imperative to receive and use containers in exports and imports.
By 2005, about 37% shares of CONCOR were divested to nongovernmental entities
including the public.
In 2004-05, CONCOR had over 100 modern rakes, each of 45 wagons and speed potential of
100 km per hour. The wagons were designed for two TEUs, and capable of carrying up to 45
foot containers. It had over 50 terminals, of which 30 were rail linked ICDs in many interior
towns, serving almost all the regions of India. It also had some road linked depots. Despite
national presence in terms of infrastructure, as much as 50% of the total container traffic
handled by CONCOR arose out of the northern region including the major ICDs in
Tughlakabad and Ludhiana.
CONCOR had extended its operations into related areas. Examples included setting up of the
third container handling terminal at JNP in collaboration with Maersk, another at
Vallarpadam as part of Kochi port for transhipments in collaboration with Dubai Port
Authority. It also operated Nepal’s ICD.
51 | P a g e
Table 4: Some Aspects of CONCOR's Operations
Terminals Owned or Operated (No) 63
Rakes Owned and Leased (No) 240
Wagons (No)
High speed (BLC/BLL)
Container flats (BFKN)
Other (BFKI/BOXK/BOXKH/BRNKH) (IR
owned)
7582
4606
1,357
1,619
Total Income (Including other Income) 5,944.44Crore
Expenditure ( Incl. increase/decrease
in stock) 9 4,277.30
Profit before Tax 1,294.45 Crore
Profit after Tax 1,047.55 Crore
Major events of Container Corporation of India Ltd. in chronological order.7
1988
1. The Company was incorporated in March under the Companies Act, 1956, was constituted
as an autonomous Public Sector Undertaking under the Ministry of Railways with the
objective of serving as catalyst for promoting containerisation and to give a boost to
India's International trade and commerce by organising multi-modal logistics support.
2. The Main Object of the Company is to promote containerisation and to give a boost to
Indian International trade and commence by organising multi-model to logistic support.
3. The Company carries on the business of providing Containerised Transport by organising
multi-modal logistics support. It operates Inland Container Deports (ICDs) which provide
single window facility in co-ordination with Railways, Customs, Sea Ports, Shipping
Lines, Road hauliers, Banks, etc. to deal with transport logistics of imports and exports.
The Company also organises rail/road transport for domestic containers and provides
consultancy in the field of multi-modal transport.
7 http://economictimes.indiatimes.com/container-corporation-of-india-ltd/infocompanyhistory/companyid-
4764.cms
52 | P a g e
4. The Company extended operations in the field of domestic traffic also. The potential for
growth in both export-import movement and domestic movement is immense and
CONCOR's strategy is aimed at capturing a sizeable portion of this market.
5. With a view to improving quality of service, CONCOR has already entered into
agreement with Railways for schedule running of export-import trains on guaranteed
transit times.
6. The Company is market oriented in its approach, offering multimodal packages to
customers and taking steps to ensure speedy and safe delivery of cargo.
1990
1. CONCOR commissioned seven container transfer/handling facilities during the year. In
addition to three ICDs at Ahmedabad, Pune & Hyderabad, two full-fledged Container
Freight Stations (CFSs) were commissioned at Moradabad and Panipat as cargo
consolidation and clearance centres with linkage to the OCD at New Delhi.
2. CONCOR has pioneered an important concept of Port Side Container Terminal (PSCT):
the one at Todiarpet commissioned in March 1991, is situated in the vicinity of Chennai
Harbour. A similar terminal was commissioned at Wadi Bunder in close proximity of
Mumbai Port in April 1991.
1991
1. CONCOR commissioned the PSCT (Port Side Container Terminal) at Wadibunder (by the
side of Mumbai Port), Domestic Container Terminals at Shalimar in Calcutta and Soft
Coke Siding. Tughlakabad at Delhi as well as a CFS at Mullund, which incidentally is its
first joint venture with the Indira Rashtriya Kamgar Co-operative Society in Mumbai. 3,
29,913 No. of equity issued to Indian Railways.
1992
1. Under MOU signed with the Ministry of Railways, container handling target has been set
at 1, 35,000 TEUs against 94,000 TEUs in 1991-92.
2. 16,600 No. of equity shares issued, subscribed and paid up by Indian Railways.
53 | P a g e
1993
1. CONCOR commissioned Inland Containers Depots at Tughalakabad in Delhi and
Whitefield in Bangalore. In addition, first phase of expansion and upgradation of ICD at
Tondiarpet in Chennai was commissioned and completed.
2. 3, 03,400 No. of equity shares issued, subscribed and paid up by Indian Railways.
1994
1. During the year a small beginning was made as a Multi modal transport operator and also
as a consultancy organization for multi-modalism.
2. The Government of India disinvested 20% of its equity shares of CONCOR viz. 129,
97,200 at average weighted price of Rs 76.71 per share.
1995
1. A new CFS was commissioned at New Mulund (Mumbai), and a new export warehouse at
ICD, Sabarmati.
2. Approval of World Bank was obtained to increase the quantity of wagons to be procured
in the second Tranche from 750 to 1500.
1996
1. Scheduled reefer services between ICD Thughlakabad and Muboni Port was also
introduced. Clearance of ODC consignments by road between ICD Thughlakabad to the
Gateway Port was started during the year.
2. Two new ICDs were commissioned one each at Agra on 19.11.1996 at Nagpur on
7.1.1997. ICD at Nagpur is rail linked with the twin ports of Mumbai and SNPT and Agra
is linked with ports directly by road ICD Tughlakabad by rail.
54 | P a g e
1997
1. Bonded work "Contract" a nominated day service linking important commercial and
industrial centres of the country was launched in the domestic segments in January.
2. Two new ICDs were commissioned one at Moradabad on 23rd February 1998 and the
other at Malanpur/Gwalior on 25th June 1998. Second bonded warehouse was
commissioned at ICD/Whitefield.
3. The CONCOR has been set up to bridge the gap between rail transport and road transport
for harnessing the gains of containerisation and attracting non bulk general goods road
traffic to rail.
4. CCI is the only company in the country which manufactures 230 KV cables for which it
has a technical collaboration with Mitsubishi of Japan.
5. The Cable Corporation of India (CCI), commissioned its new plant at Nasik on March 27,
with a capacity of 10,000 ckm as scheduled.
1998
1. Disinvestment commission chairman G.V. Ramakrishna has criticised the government for
mismanaging disinvestment process in public sector Container Corporation of India
(CONCOR).
2. The disinvestment of shares in Container Corporation of India (CONCOR) is significant
as this is the Government's first domestic offering in nearly three years.
3. Credit rating Information Services of India (Crisil) has downgraded the `A+' rating
assigned to the Rs. 31.50 Crore non- convertible debenture issue of Cable Corporation of
India Ltd (CCIL) to `A-'.
1999
1. The Container Corporation of India (CONCOR) will shortly launch a daily service
between Chennai port and Whitefield ICD, Bangalore.
2. The company has introduced a voluntary retirement scheme (VRS) for its 700-odd
employees at its Borivali unit.
3. The non-convertible debenture issue of Cable Corporation of India worth Rs. 315 crores
has been downgraded from `BB+' to `C' by Credit Rating Information Services of India
Ltd (Crisil).
55 | P a g e
2000
1. The Company has created a separate domestic division to give a major boost to the
company's growing interest in domestic container movement.
2. Container Corporation of India has introduced an express parcel service vans between
Chennai and Delhi with effect from August 1.
3. India's largest private sector warehousing company, Continental Warehousing Corporation
has entered into a strategic alliance with leading public sector undertaking Container
Corporation of India for handling domestic cargo.
4. The Company appointed Mr. R. C. Dubey and Mr. P. C. Jha as directors.
5. Container Corporation of India Ltd. has opened the first hub point in South India for less
than container load cargoes at its Tiruvottiyur container freight station.
2001
1. The Container Corporation of India (CONCOR) has launched a fixed-day fixed-time
weekly freight service between Shalimar (Howrah) and Mumbai and Shalimar and
Ahmedabad with transhipment at Nagpur.
2. Container Corporation of India Ltd has paid a dividend of Rs 27.4 crore for 2000-01 to the
Indian Railways.
3. Container Corporation of India Ltd has informed BSE that the Government of India,
Ministry of Railways, Railway Board has appointed Shri P.G.Thyagarajan, and Shri
Rakesh Mehrotra as Director (IM&O) and Director (P & S) respectively w.e.f. December
12, 2001.
2002
1. Shri.M.C. Srivastava Member Traffic/Railway Board has been appointed as part time
chairman in the place of Shri.R.K.Thoopal.
2. Mr.R.K.Narang, Dr.P.S.Sarma and Mr.M.R. Dixit are appointed on the board of the
company as part time Non-official Directors.
3. Ministry of Railways has extended the term of Mr.Birkhe Ram beyong June 2002.
56 | P a g e
2003
1. K.K.Agarwal has been appointed as part time chairman of CONCOR.
2. CONCOR, the sole provider of containerised goods transport unveiled Asia’s biggest
inland container depot (ICD) at Dadri.
3. Kolkata Port trust has tied up with CONCOR to provide services to shippers to transport
contain using sea rail-mode between Nepal and Kolkata Dock Systems (KDS).
4. CONCOR recommences its wagon movement from northern India's largest container
depot at Tuglaquabad in Delhi to Jawahar lal Port Trust in Mumbai.
5. Pradeep Bhatnagar appointed as Part-time Govt Director.
6. Shri Birkhe Ram, Director (Finance)/ CONCOR has ceased to hold the directorship on
account of his superannuation on November 30, 2003.
7. Ministry of Railways has communicated the appointment of Pradeep Bhatnagar Railway
Board as Part-time Govt Director wef September 22, 2003 vice Shri Prakash, the then
Part-time Govt Director.
2004
1. Maersk-CONCOR bags 3rd JNPT terminal project.
2. CONCOR inks pact with Transworld to set up CFS at Dadri.
3. CONCOR forges alliance with APL for box freight station at Dadri complex
4. CONCOR inks pact with Apeda for movement of perishable goods
2005
1. CONCOR rolls out telescopic tariffs for bonded trucking cargoes.
2. CONCOR & GDL signs agreement for providing train services to transport EXIM
container traffic.
3. CONCOR to launch new road based cargo service from Coimbatore
4. CONCOR inks MoU with Baxi Group
5. Corporation of India (CONCOR) has tied up with Japanese shipping giant NYK and is
working on a detailed business plan for the end-to-end auto transportation solutions
project.
6. CONCOR to begin barge service between KDS, Narayangunge port.
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2009
1. Container Corporation of India Ltd (CONCOR) has informed that pursuant to the
Government approval, Shri Anil K. Gupta, Director (Domestic Division) has taken over
the regular charge of the post of Managing Director / CONCOR w.e.f. December 30,
2009.
2010
1. Container Corporation of India has recommended a Final Dividend of 80% (Rs. 8/- per
equity share) which is in addition to an interim dividend of 60% (Rs. 6/- per equity share)
already paid.
2011
1. Inauguration of CONCOR's 62nd Terminal PSCT Vallardpadam, Cochin.
2. Introduction of E-tendering in CONCOR.
3. Concor enters into agreement with Krishnapatnam Port, for developing rail infrastructure
at the port terminal and provide seamless movement of container traffic from the port to
the hinterland.
2012
1. Container tracking facility by using SMS.
2. CONCOR has been awarded with ‘IT Innovation & Excellence Award 2012’ by
Knowledge Resource Development & Welfare Group (KRDWG) for Excellence in
Application of MIS in Industry.
2013
1. Container Corporation of India Ltd has declared a Final Dividend of Rs. 9.50 (95%) per
equity share of face value of Rs. 10/- each. -Container Corporation of India has announces
bonus in the ratio of 1:2 2014 -Container Corporation of India Ltd has declared a Final
Dividend of Rs. 5.30 (53%) per equity share of face value of Rs. 10/- each.
58 | P a g e
2015
1. Container Corporation of India Ltd (CCI) has sanctioned setting up of two new Multi
Modal Logistics Parks (MMLPs) at Tehi in Madhya Pradesh and Barhi in Haryana. -
Container Corporation of India Ltd selected as the winner for the ""Most Efficient
Miniratna of the year- Non-Manufacturing" by Dalal Street Investment Journal (DSIJ),
organized the PSU Awards 2014 -Container Corporation of India limited signed the
Memorandum of Understanding with Ministry of Railways, for setting out various
physical and financial targets for FY 2015-16 -Container Corporation of India -
Inauguration of CONCOR’s Perishable Cargo Centre (PCC) by Railway Minister.
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Exhibit 2: RITES, the Consultant8
RITES was a public enterprise of the Government of India (GoI) under the administrative
control of MoR, with much of its staff drawn from IR, like CONCOR. It was established in
1974. While it had a full time Managing Director, the ex-officio Chairman was the Member
(Mechanical), RB. It was a multidisciplinary consultancy organization in the fields of
transport, infrastructure and related technologies. According to its website, “It provides a
comprehensive array of services under a single roof and believes in transfer of technology to
client organizations. RITES is internationally recognized as a leading consultant with
operational experience of 62 countries in Africa, South East Asia, Middle East and Latin
America. Most of RITES’ foreign assignments are for National Governments and other apex
organizations”. Though predominantly perceived as a technical consulting organization in the
domain of transport (railways in particular), it had closely worked with governments in
technical consultancy related to infrastructure development in many countries.
RITES employed over 2000 staff including over 1200 specialists of high professional
standing in the fields of engineering, management and planning.
In 2014-15, Operating Income was INR 12.46 Billion and Net Income of RITES was INR
2.64 Billion.9
8 http://ritesltd.com/index.php?page=page&id=8&name=Profile&mid=8
9 https://en.wikipedia.org/wiki/RITES
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Exhibit 3: PC’s Note dated 22nd October, 2005
“Entry Criteria”
(i) To keep out ‘frivolous contenders,’ only export import traffic be considered. Since
upfront investment in rolling stock would be a prerequisite, it is unlikely that ‘frivolous
contenders’ will come forward at all, particularly because such investment cannot be used for
any other purpose.
Further, there is no reason to restrict the policy to cover only export import cargo. The
existing operator, CONCOR, also carries domestic cargo. Allowing carriage for both kinds of
cargo will enable operators to maximize their carrying capacity and asset utilization.
Railways will benefit from running full loads in both directions. It is also possible that export
import cargo may require to be carried as domestic cargo before customs sealing. Domestic
cargo should, therefore, be covered under this policy.
(ii) Operators will be provided entry on specific routes which have been put in four categories
on port linkage basis.
The objective is not clear, particularly since this will restrict free competition and deny a
level playing field with the existing operator. All operators should have the equal access to
the entire rail network, at par with the existing operator, so that customers have a real choice.
(iii) IR may prescribe the minimum standards and scale of rail linked terminals. This does not
seem relevant to railways and, therefore, need not be prescribed under this scheme.
(iv) Operators should provide a minimum traffic commitment, with one year given for
stabilising the minimum volumes
The Railways do not incur any opportunity cost or capacity charge if operators fail to provide
traffic because no railways capacity is to be reserved or earmarked. Therefore the need for
stipulating minimum traffic commitment from operators is not necessary.
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Entry Fees and Revenue Share
(i) Higher the level of traffic, higher the entry fee. Entry fee will go towards meeting the
infrastructure requirements
A new operator will offer container traffic from his own siding and on his own rolling stock,
for carriage by railways on payment of freight which is calculated on fully distributed cost
plus profit. This confirms with the railways’ business model. Whatever railways wish to
realise should be charged through freight. Levy of an entry fee as currently proposed, is
discriminatory.
Investing in rail infrastructure should not be a prerequisite for running container trains.
Container business constitutes only 2-3% of total freight business on the IR. Even though this
share is likely to increase, it will still remain marginal. It is, therefore, not fair to ask
container business to finance line capacity when it utilizes only a small fraction of it.
(ii) Operator should share revenue on incremental traffic as this would interfere with ‘normal’
levels of traffic
Sharing revenue on incremental traffic would contradict railways’ own policy of offering
volume discounts to its customers and would be a disincentive for increasing volumes.
Further, the conditions applicable to CONCOR should also apply to new operators.
Other
(i) Maintenance of rolling stock will be done by IR as it does not permit maintenance by
private parties
While the operator will naturally bear the cost of maintaining the rolling stock owned by him,
railways should consider allowing him to engage other agencies for this task. Railways may
not always have the requisite resources to suit the requirements of the operator. Railway
maintenance could then become a constraint in terms of detention to rolling stock. It would
be more efficient if maintenance were carried out by other agencies subject to railway
inspection and supervision relating to safety.
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(ii) Services for shunting and formation of trains etc will be done and charged for separately.
It should be clarified that the same rules will apply to CONCOR and its competitors.
(iii) ROE will be 15% and payback for operators would be 12-13 years
Since these services would be open to competition, such projections seem unnecessary.”
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References
1) https://en.wikipedia.org/wiki/Economy_of_India
2) https://www.cargoji.com/blog/index.php/2016/03/04/the-changing-face-of-the-indian-
logistics-system-2/
3) http://www.arshiyalimited.com/Downloads/Investors/Analystreports/KarvyLogisticsTh
ematic22-03-2012.pdf
4) http://globalbizresearch.org/files/6029_irrem_s-ramachandran-mayur-s-nakhava-
kumar-pratik-141856.pdf
5) http://www.concorindia.com/corpFigure.asp
6) http://articles.economictimes.indiatimes.com/2005-02-26/news/27493558_1_indian-
railways-freight-growth-originating-passenger-traffic/4
7) http://www.rites.com/web/index.php?option=content&task=view&id=49&Itemid=93
8) https://en.wikipedia.org/wiki/Intermodal_freight_transport
9) http://www.drt-int.com/2013/08/22/benefits-of-intermodal-transportation/
10) http://www.baltamerica.spb.ru/eng/forwarding/multimodal-transportation.html
11) https://en.wikipedia.org/wiki/Multimodal_transport
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Bibliography
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G. Raghuram, W.P. No. 2010-09-01
2) The Evolution of Containerization and its Impact on Globalization James Frost, MA,
MBA IOI, Dalhousie University July 9, 2010
3) Domestic Container Business in India: Major Stakeholders Today & Industry's
Perspective By Gandhi Amitkumar Prakash, Indian Institute of Management
,Raipur,June, 2014
4) Introducing Competition in Container Movement by Rail, Sebastian Morris, Ajay
Pandey, G Raghuram, Rachna Gangwar, W.P. No. 2010-02-02, INDIAN INSTITUTE
OF MANAGEMENT AHMEDABAD-380 015 INDIA
5) The Logistics Sector in India: Overview and Challenges, Pankaj Chandra, Nimit Jain,
W.P. No.2007-03-07
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August, 2012