Source: The Loadstar
Date: 5th October 2023
Indian exporters and importers face a major escalation in logistics costs after it was announced that from 1 October the traditional “busy season surcharge” would now include containerised railfreight.
Traditionally, container railfreight has been exempt from October-to-June peak season surcharges, industry sources told The Loadstar, and the sudden and unprecedented introduction of the new tariff was a shock to the sector.
The 10% surcharge will run until further notice, said Indian Railways (IR).
Any price revisions implemented by IR inevitably trickle down to be added to rates applied by container rail operators as the network infrastructure is government-controlled.
The unusual announcement drew sharp pushback; the Association of Container Train Operators (ACTO) called for an immediate retraction, or otherwise a three-month reprieve.
“By including containers under the busy season surcharge, selective discrimination has been made against the container sector,” said ACTO in its appeal to the government.
“It is our contention that the container sector will continue to provide the maximum long-term potential for cargo migration from road to rail, but such discriminatory and cost escalatory initiatives will only work to drive traffic away from rail,” the group warned.
ACTO president told The Loadstar the price hike would have “costly repercussions” for container train operators trying to consolidate a modal shift from road to more sustainable railways.
“It will have an immediate impact on the health of the business,” said ACTO. And ACTO added that “the road sector does not face any seasonal surcharges (if at all, it often benefits from off-season discounts)”.
According to ACTO, because there is also no waiver for empty equipment moves – often incentivised to keep cargo flowing seamlessly – this would compound concerns over potential price differentials between the modes. It said: “At a time when road costs have been dropping and service quality getting better due to improved road conditions, this increase in cost will lead to the rail sector becoming uncompetitive.
“Efforts to develop domestic circuits where some extent of empty moves is built into the business will also be severely impacted,” ACTO added.
The executive director of the Container Shipping Lines Association (CSLA), also voiced serious concern. He said: “This announcement is indeed shocking. This sudden increase should be revoked, or at least postponed for the benefit of the trade.”
Ultimately, the haulage hike gets rolled into the carrier ocean freight rate, negating any line-haul cost gains for the cargo owner. Container lines have already told customers that the 10% surcharge will trigger a haulage rate hike for ICD (inland container depot) volumes.
A 20ft ICD move from Delhi to Mundra earlier cost the shipper IR19,000 ($230) and IR38,300 for a 40ft haul, on average, according to industry data.
Indian Railways ended its fiscal year 2022-23 on an upbeat note, with freight volumes hitting a new high, thanks to modal shift efforts and targeting new commodities.
Indian inland supply chains are on the cusp of a game-changer with the commissioning of the long-awaited dedicated freight corridor between the northern hinterlands and west coast ports, such as Mundra, Nhava Sheva and Pipavav.
But soaring haulage rates and ad-hoc charges imposed by some container terminals remain a source of concern for rail operators and cargo owners. To amplify the context, following trade pressure, Adani Ports last year recalled its trade notices imposing extra user fees on container trains operating to/from Mundra Port.
Meanwhile, Indian importers have received some tax relief as the government has removed a 5% GST (goods and services tax) on import freight charges for shipments contracted on a pre-paid or cost and freight (C&F) basis.
But the discontinuation of GST exemptions for ocean/air freight charges for export cargo continues to be a pain point for the industry.