Temples on wheels

After the oil-PSU currency printing presses, guess which PSU is the most profitable.

It’s the Container Corporation of India Limited (Concor)—its gross profit is a whopping 31 per cent of turnover, and post-tax net profit over 20 per cent, a feat unmatched by even most private sector companies, especially considering how Concor’s profitability has steadily risen over the years.

Of course, the flip side is that this is all monopoly rent being extracted out of the country’s exporters and importers, who have no option but to use Concor’s services if they want to move their containers by rail.

What makes things even worse is that despite all the monopoly profits, Concor has a huge shortage of wagons to carry the containers, of anywhere between 50 per cent and 60 per cent of its current capacity—which means that the government can do its best to get the turnaround time in most ports reduced from eight days a few years ago to under one now, import containers still have to wait for around 10–12 days at the JNPT before Concor can ship them and for 8–10 days at the inland container depot in Tughlakabad before export containers can be shipped out!

You just have to visit any port, and see the sea of containers even spilling out on to the roads to realise just how bad things are.

Which is why, close to a decade ago, the government actually decided to break up the monopoly, but for some reason or the other, no one was ever allowed to transport containers by rail.

Ironically, when the railways went in for an ADB loan last year, one of the reform measures they mentioned was that there was a policy in place to allow private parties to set up Concor-type facilities!

Indeed, when the private sector promoters of the Pipavav port decided to go ahead and set up their port facility, they entered into a joint venture with the railways (the Pipavav Railway Corporation Limited, or PRCL) to carry freight to and from the port.

And even before the company was set up, the Gujarat Pipavav Ports Limited (the private promoter) asked the railways for permission to carry containers by rail—naturally, since over 95 per cent of the port’s cargo is containerised.

In November 2000, an in-principle permission was granted, and the port authorities began their work in earnest. Once PRCL was formed, the existing meter gauge railway line from Surendranagar to Rajula and then to Pipavav was converted to a broad gauge one in a record one year.

And while the actual rail operations were run by the railways (that’s the law), PRCL managed to get the railways to reduce flab on their line.

Against a staff of 1,150 people on the Surendranagar-Pipavav stretch in the pre-PRCL days when there were two trains a week, PRCL has well under 700 people to service two trains a day—eventually, when the traffic picks up to 20 trains a day, there will still be no increase in railway staff.

While the railways would have had around 540 people in gangs to maintain the track based on the norm of one gang of 20 persons per 10 km of track, PRCL has only 250, thanks to the use of more equipment for track maintenance.

Yet, for all the efficiency, PRCL is defaulting on payments of interest to lenders.

Now, it’s not my case to defend the private promoters who’ve not even paid up their full share of the equity and have failed to make good even the guarantee for the traffic not rising up to the promised levels, but the railways refused to allow PRCL to operate container trains—so, all container trains on the line continued to be run by Concor and, as a result, according to PRCL, there was a 50 per cent fall in the company’s revenues as compared to that projected in the original business model.

With Concor charging customers Rs 10.53 per TEU-kilometre, and paying PRCL Rs 6.7 per TEU-kilometre, it earns a whopping 36 per cent on each consignment.

This is clearly unfair for a variety of reasons. For one, it is a breach of promise, it represents going back on the stated 1994 policy, and on a commitment made in November 2000.

More important, with over 50 private railway lines along the lines of PRCL being planned, it’s very clear that each one will go sick if Concor’s monopoly is not broken.

While it is true that Concor’s monopoly has been protected by non-Congress governments so far, the chances of the United Progressive Alliance wanting to allow the private sector entry into this exclusive preserve do look a bit bleak, considering that the UPA’s so hell-bent on protecting and increasing the reach of the public sector.

While Petroleum Minister Mani Shankar Aiyar is keen on merging various oil PSUs to create even bigger ones, Finance Minister P Chidambaram is considering bail-out plans for three more PSUs, apart from the two already bailed out in the Budget.

And Telecom Minister Dayanidhi Maran has said he’s going to continue with the policy of getting private telephone operators to subsidise the public sector BSNL by paying it around 70 paise for each minute of calls on their networks through what’s called Access Deficit Charges—it’s because of these huge assured ADC inflows that BSNL managed to slash cellular tariffs earlier this month.

It is obviously completely unfair to force the competitors to subsidise you, but try telling the government that.

From a temple for Lord Ram, we’ve moved to the 1950s and 1960s’ slogan of building and reviving Nehru’s famous “temples of modern India”. If that’s progress …