Reliance has railway cargo plans

Reliance Industries Ltd is planning to get into the railway container cargo business. Company sources said RIL was interested in the three most profitable routes: Jawaharlal Nehru Port in Navi Mumbai to the inland container depot in Tughlakabad in Delhi, JNPT to Pipavav Port and JNPT to Mundra Port in Gujarat.

"This move gains significance as RIL is all set to acquire a sizeable equity in the special economic zone promoted by Nikhil Gandhi near JN Port," sources said.

After the government recently decided to permit private players in container cargo operations, RIL began planning to bid for these select routes, the sources said.

At present, government-owned multimodal logistics operator Container Corporation of India Ltd (Concor) has monopoly in container freight operations by rail in India.

Other players interested in these routes are Gateway Distriparks, Kutch Rail Company, Pipavav Rail Corporation, Central Warehousing Corporation, the JM Baxi group, Adani Logistics, Thar Dry Ports, Maersk India, P&O Ports, APL Logistics, the NOL group and NYK Line.

Asked about the impact private companies would have on the operations, Concor Chief General Manager (western region) Arvind Bhatnagar said there was room for everybody and that Concor would not be impacted by the entry of new players.

The railway board is finalising a draft concession agreement for the private players. RIL will have an edge in logistics as it has infrastructure and a transport network to link JN PT with intended destinations. The port handles over 56 per cent of India's container traffic.

RITES has proposed an entry fee, between Rs 25 crore (Rs 250 million) and Rs 130 crore (Rs 1.30 billion), for bidding, depending upon volumes and traffic handled by various routes in this lucrative business.

However, the Planning Commission is planning to lower the entry level barrier to one-third of the proposed fees to promote competition in the sector.

At present, Concor is operating 55 terminals across the country. It has posted a net profit of Rs 122.13 crore (Rs 1.221 billion) and a Rs 598.69-crore (Rs 5.986 billion) total income from operations for the quarter ended September 30, 2005.

The average cost of running a train having 45 rakes is estimated at Rs 10 crore (Rs 100 million) while the cost of setting up terminals will depend on business volumes and locations.

"The average cost for one terminal is estimated at Rs 100 crore (Rs 1 billion), or else the player will have to tie up with Concor," industry analysts said.