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Railways launches new freight initiatives


The Minister of Railways, Mr Suresh Prabhu, last week launched new freight initiatives with the aim of giving a fillip to cargo movement by rail. He released a new freight structure for double-stack dwarf containers and signed agreements under Long Term Tariff Contracts (LTTC) with TISCO, India Cements and UltraTech Cement.




Long Term Tariff Contracts


The Minister had in the Budget speech 2016-17 announced that Indian Railways (IR) shall enter into Long Term Tariff Contracts with key customers using pre-determined price escalation principle, to develop a long-term commitment.


The LTTC was finalised after a process of structured dialogue with key customers.


Under LTTC, IR shall be assured of long-term freight revenue commitment from customers at pre-determined price escalation principle as the customer shall commit Minimum Guaranteed Gross Freight Revenue (MGGFR) for each year of the contract period at a minimum of 5 per cent increase over the previous year.


Customers shall stand to benefit from freight rebates, which will be linked with incremental growth in gross freight revenue and as well as absolute volume of traffic.


The rebate ranges from 1.5 per cent to 35 per cent based on incremental growth in revenue, and 0.5 per cent to 5 per cent on the total volume of traffic.


The contract under LTTC will be for a minimum period of 3 years and maximum 5 years.




The existing customer who offered minimum 1 million tonnes of traffic in the previous year (previous 12 months) is eligible for LTTC.


The new customer has to make commitment to offer at least 3 million tonnes of traffic during the agreement period, and at least 1 million tonnes in the first year itself.


The agreement will be signed by the Zonal Railway with customer/s. In case of traffic from multiple terminals, agreement can be signed with the Zonal Railway having maximum share of traffic (in the total traffic).


Three LTTC agreements were signed last week:


* Tata Iron & Steel Co. (TISCO) with South Eastern Railway


* India Cements with South Central Railway


* UltraTech Cement with South Central Railway


Around 10 proposals are in the pipeline on different Zonal Railways and it is expected that these will be finalised in the next 2 to 3 months, said a release.


New tariff policy for double-stack dwarf container


The Railway Budget 2016-17 had proposed the introduction of new delivery models and expansion of the freight basket with the aim of achieving competitive edge over road traffic.


In compliance, the freight basket for container traffic has been expanded and around 45 commodities de-notified from the notified list and included in FAK rates, which are 30 per cent lower than the notified tariff rates.


Further, last week saw the new tariff policy for Double Stack Dwarf Container (DSDC) trains being issued.


* The commodities which have been de-notified and are likely to be attracted to container traffic include: bricks and stones, sanitaryware, stone pillars, polished granite slabs, white cement, asbestos, cement blocks, cement plasters, fly ash, chemical manures, clay and sand, flours and pulses, iron and steel, cable wires, fish plates, ingots, pipes of all types, wheels, iron and steel pipe cuttings, all types of metal and steel scrap, salt, soap, sugar and many more.


* In addition, over 50 other commodities are being added to the rail freight basket.


* Double Stack Dwarf Containers are designed with 6 feet 4 inches height to run under wire on electrified routes.


* DSDC shall, therefore, run on routes where only single-stack of ISO container could run.


* There is huge potential for DSDC as it can be run under wire all over the rail network.


* A trial run was launched in the presence of the Minister and conducted successfully in March 2017 on the Jamnagar-Ludhiana route.


* The Jamnagar-Vapi section has also been identified for running of DSDC.


* A DSDC can carry 50 tonnes as against 26.50 tonnes in a single stack conventional container, i.e. an increase of 89 per cent.


* At normal haulage rate, DSDC can generate more than 50 per cent revenue as against single-stack conventional container.


* This is a unique case where even after granting a rebate of over 15 per cent, the profitability of both IR and the customer shall increase by 25 per cent each. Hence, the new freight structure for DSDC.


* The new concessional freight structure is expected to significantly bring down the overall logistics cost in the country.


* The flats are available with CTOs and industry shall order dwarf container rakes as per requirement for running on IR.


Speaking on the occasion, Mr Prabhu said that long-term agreements with key customers will benefit both customers and Railways. The Railways has reformed its freight policy to make it customer-friendly, ensuring growth in volumes and traffic. Double-stack dwarf container is another win-win proposition for Railways and customers in the freight sector. The Railways is committed to maintain and cherish its relationship with freight customers, he stressed.


Source: Exim News Service - New Delhi, July 16


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