Road transport has traditionally been the dominant mode of transport to ferry the vehicles from the manufacturing hubs to market destinations in India due to its flexibility and accessibility. Gradually, automakers are shifting to railways to carry their vehicles from the factories to the dealerships mainly to cut logistics cost, meet sustainability targets and comply with emission norms. This also allows them to reduce the transit time, ferry larger volumes of vehicles in one go and ensure safety during transportation.
The rail freight rates have remained stable for the past 10 years, which has been a major support for the industry. However, the Ministry of Railways has revised the rates of haulage charge, increased the freight rates by 20% for the movement of Bogie Covered Autorake Double Decker Wagon (BCACBM) from the current financial year.
“Automobile manufacturers have internal targets for utilization of railways and have been working towards achieving that. But with this rate revision, manufacturers may need to re-look at their targets and might shift their volumes to other modes of transportation,” Rajesh Menon, Director General, Society of Indian Automobile Manufacturers (SIAM) said.
“Automobile sector was not anticipating such a revision. Rather, a revision in a phased manner would have been more appropriate, year-on-year basis, for business planning,” he said. Industry experts believe that such a rate revision has come up at a time when transportation via railway rakes was increasingly becoming a preferred mode. Such a revision in rates may serve as a dampener in its growth.
Bal Malkit Singh, Chairman- Core Committee & Former President, All India Motor Transport Congress (AIMTC) said that the 20% revision in rates signifies that the current freight structure is not viable in the light of rising operating costs.