Keep it on track

Lalu Prasad's Budget announcement to allow the private sector into what was hitherto the monopoly of the public sector Container Corporation of India (Concor) finally appears to be taking shape.

The railways are now drafting the rules for allowing this to happen, and one hopes that this time there will be no slip between the cup and the lip.

It is worth recalling that the joint sector Pipavav Rail Corporation Ltd (PRCL) was granted this right several months ago, but a couple of days later it received a letter informing it that the original permission would be kept in abeyance.

It’s also useful to remember some history. The government made a commitment to end Concor’s monopoly way back in 1994. Nothing happened, but the promise was reiterated in 2000, and repeated once again in 2003, when the railways took an ADB loan.

There are several reasons why the Concor monopoly has to go, the most obvious one being that it keeps freight rates too high. Equally important is the fact that Concor simply doesn’t have the money required to be able to provide enough wagons for both exporters and importers.

Importers still need to wait for a week or more before their containers can be transported out of the country’s ports. Ditto for exporters, who want their containers moved out of inland container depots to the ports.

On the PRCL line, Concor used to charge Rs 10.53 per TEU-kilometre (the unit used for containers) and paid PRCL Rs 6.7 per TEU-km for using the latter’s tracks. That’s a huge margin earned on each container. Naturally, this will drop once there is greater competition.

Under the new policy, it is expected that companies which wish to set up Concor-type operations will have to invest in infrastructure like wagons and, perhaps, even lay their own tracks.

That will increase investments by a significant amount and free up the railways’ resources for use in more urgent areas, including track renewal and safety.

This, however, is also an area where the railways could trip up future competition if there is no one to ensure fair play. Under the law, tracks can be laid only by the railways (with the private party financing it). It is thus possible for the railways to delay this as long as possible.

Also, once a private track has been built, or an existing one leased out to a private player, what is the guarantee that prices will indeed come down? There is none, since there will still be just one supplier on various stretches of track, even though this supplier may now be a private party and not a public sector undertaking.

Genuine competition requires that any user be allowed to move container wagons on any track in return for a fee that is worked out by an independent regulator, subject naturally to the availability of engines and other such criteria.

This is what is called “open access” and it works wonderfully in sectors like telecom and electricity the world over. The railways have made a welcome beginning, but they need to move further and faster along the right track.