Costly containers

It is easy to believe that the real cost of running public sector undertakings (PSUs) is the losses they incur.

However, the fact is even profit-making ones can inflict costs on the economy, especially when they are monopolies. With a gross profit of around a third of its turnover, no PSU illustrates this better than the Container Corporation of India (Concor).

Concor has the monopoly over moving containerised cargo across the country by rail. Today, by most accounts, there is believed to be a wagon shortage of anywhere between 40 and 50 per cent of total demand.

A good part of the blame for the recent congestion at the Nhava Sheva port, for instance, lies at Concor’s doors since the annual demand for container movement—both to and out of the port—is said to be 50 per cent higher than what Concor is currently able to handle.

Even excluding Nhava-Sheva, there is a delay of 8-10 days before containers can be moved out of the inland container depot at Tughlakabad due to Concor’s insufficient infrastructure. So while the government is doing its best to cut congestion time at the leading ports, Concor’s shortcomings ensure that the net waiting for exporters and importers remains more or less the same!

While it is possible to move containers by road as well (there’s no monopoly here), the rules are structured in such a way as to make this unattractive. Anyone moving containers by road has to provide a bank guarantee for the value of the consignment plus the value of the import duties leviable on it.

So, if people still get their containers moved by road, it’s a sign of just how fed up they are with the inefficiencies inbuilt into Concor’s monopoly. While the government is reportedly considering breaking up Concor’s monopoly (there are proposals pending from the Central Warehousing Corporation as well as some shipping lines and various operators of private ports), nothing much has moved on this front for around a decade now.

It was in 1994 that the government first spoke of breaking up the Concor monopoly, and the idea was repeated several times after that as well. Indeed, when the railways went in for an ADB loan last year, they had talked about the move to break Concor’s monopoly as one of the steps being taken in the reforms arena.

And in 2000, the railways had even agreed to allow Concor-style rail movement of containers on one of the railway lines run by a private port. Till date, however, the clearances have not come through.

If the government is serious about making the economy more efficient, it has no option but to move quickly to abolish monopolies that cause huge productivity losses to the economy. That, in fact, is true for all monopolies, not just Concor.

While the commerce, industry and shipping ministries are reported to be in favour of ending the monopoly, it appears that the railway ministry is still not on board. Tackling this also promises to be a tricky issue given the sensitivities of coalition politics.