Railway push to grab auto transport pie

Automakers in the south are expecting a reduction of 10-15% in cost of transporting vehicles

Swaraj Baggonkar & Ajay Modi | Mumbai/New Delhi February 26, 2016

Automakers especially those in the south are expecting a reduction of 10-15 per cent in cost of transporting vehicles if government plans of having a rail-auto hub in Chennaireceives the due push.

Railway Minister Suresh Prabhu on Thursday announced that the auto hub in Chennai complete with a logistic park and due for inauguration will aid warehousing and transportation of automobiles to different parts of the country.

Transport by rail is 10-15 per cent cheaper than transport by road, as per estimates. Besides being safer, cost and time efficient, rail transport negates tampering of goods as they are sealed in containers. Automobile companies have thus welcomed the move.

R C Bhargava, chairman, Maruti Suzuki said: "There are advantages in terms of safety to the vehicle. Damages can be avoided. Obviously, it is not an economically unviable proposition". Maruti Suzuki has been using rail as a mode to transport vehicles for last few years through dedicated rakes and other wagons.

This is, however, not the first time that the railway ministry has made a push for attracting automobile companies. A policy formulated during the UPA regime allowed automobile firms to lease the trains for transporting vehicles with help from logistic companies, however the plans weren't very successful.

The new rail-auto hub will serve Hyundai, Nissan-Renault, Ford, BMW and Daimler who are based near Chennai in areas like in Oragadam and Sriperambudur. "This will bring significant efficiencies and reduction in logistic costs for many automobile OEMs in and around the Chennai region including us", said Sumit Sawhney, chief executive and managing director, Renault India.

The Indian Railways uses specially designed wagons to transport the vehicles. At present just about 2-3 per cent of automobile transport is done using the railway while the balance 97-98 per cent is done by road. The government has also started encouraging vehicle transport by ship where recently cars of Hyundai was shipped from Chennai to Kandla (Gujarat).

Frequent agitation leading to blocking of highways, freight rate increase, strike by truck drivers and accidents leading to financial loss are some of the inherent risks of transporting vehicles by road.

"The announcement of Rail Auto Hub in Chennai is significant and would help southern auto OEMs to improve their logistical multi-modal efficiencies significantly. The Auto Hub will encourage transportation of cars through railways, thereby offering a greener logistical solutions through decongestion of road traffic", a Ford India spokerperson said.

The railway ministry had formulated a policy of Automobile Freight Train Operator Scheme in 2010 which was superseded by another one in 2013. It was proposed then to develop similar automobile and ancillary hubs at strategic locations across the country.

Pravin Shah, president and chief executive (automotive), Mahindra & Mahindra said: "This is a very welcome step. These are the enablers for achieving the kind of growth the auto industry is looking for. But we just have to see how quickly these are put into place".