Indian Railways has suspended its plans to allow private companies in the country to run railway terminals as hubs to ship finished vehicles by rail. The plans, known as the ‘Autohub’ policy, were initially intended to open up some of the handling and operations to the private sector, however the railways have now decided that private companies should not operate its rail terminals. Rather, logistics providers are being encouraged to invest in their own distribution centres.
Until now, the Indian Railways had been planning to award seven-year concessions to private companies to turn some of the railways’ unused land into ‘Autohubs’ that could aggregate finished vehicles and prepare them for shipping across the country. But speaking last week at the Automotive Logistics India conference in New Delhi, Suhas Kumar, a freight management advisor to the Ministry of Railways, revealed that the plans had been “put on hold”.
“The railways has set the Autohub policy on hold because it is the railways’ belief that no private companies should be operating railway terminals in India,” she said.
Rather, Kumar suggested that logistics providers could develop private terminals in proximity or connected to the railway terminals, and thus act as distribution centres.
The news came as something of a surprise to many attending carmakers and logistics providers, as there has yet to be an official release by the ministry on the subject.
Some executives from OEMs said that the latest plans would lead to further delays in India’s rail development, as few companies would be willing to make the investment.
Hyundai India’s Anand Venkateswaran, head of sales logistics for the country’s second largest carmaker, said that private companies would be reluctant to invest so much money without having much control over the operations, which would remain with the state-run railways.
“I fear that perhaps this polite language of the autohubs being ‘on hold’ could mean it is a policy dead in the water,” he told Automotive Logistics. “We could see rail development delayed another 4-5 years as a result.”
Only about 4% of vehicles are estimated to move by rail in India today, with the rest going by road. Current forecasts, including those by IHS Automotive, anticipate that India’s new light vehicle market could nearly double by 2015 from 3m today to 6m units. Without rail, India’s already strained road network would have to carry an even larger burden.
“If you want to improve on logistics efficiencies in India, the railways will have to play a big role,” said RS Kalsi, executive officer for parts, accessories and logistics at India’s largest OEM, Maruti Suzuki.
Who will take the plunge?
Kumar acknowledged that the requirement for investment appears to have prevented OEMs and logistics providers from “taking the plunge” and investing. Indeed, during the conference, a question was posed to a panel of carmakers and providers, including Mahindra & Mahindra, Honda as well as Mercurio Pallia, one of the largest vehicle logistics providers (and now part of the Gefco Group), about whether they envisioned their companies being willing to invest. The question passed unanswered.
However, Kalsi told Automotive Logistics that Maruti Suzuki was looking carefully about how to move forward with investments for rail. He said that it was possible that the carmaker would carry them out with or through a logistics provider.
Prem Verma, head of Tata’s Motor’s vehicle logistics and distribution arm, TML, also suggested that the proposals by the railways were “workable”–but he acknowledged that they would require both investment from providers, as well as added cost that carmakers currently do not face. Umesh Bhanot, from Adani Logistics, pointed out that the railways were likely to allow private companies to load and unload wagons for a fee, a procedure currently allowed for containers (for which rail has been liberalised further in India) at a charge of Rs. 160,000 ($3,000). “It is reasonable to expect the railways would allow something similar for wagons at a similar rate,” he said. 
In the meantime, however, the industry is unlikely to see a mass rise in the rail logistics and will have to, as Hyundai’s Venkateswaran put it, “make do and improve what we already have”. That includes some movement by rail of vehicle using containers, but will mostly depend on improving road transport.
The need for a new wagon
Kumar also made it clear that the railways expected the automotive logistics industry to develop a new rail wagon design suitable for moving vehicles, as the three currently available are not sufficient for transporting most vehicles. Kumar said that, because of its lack of expertise for automotive, the railways would not be designing wagons. “Any of the designs that the Indian Railways has previously done itself have been rotten, frankly,” she said. “We understand about rail wagons, but not about automotive.”
She said that while she had heard a lot of potential plans about different wagon prototypes, including one design from a Vietnamese manufacturer, she had yet to be presented with anything concrete. RS Kalsi, however, told Automotive Logistics that his company was working on deciding a wagon-prototype with providers.
Hyundai’s Venkateswaran, told Automotive Logistics that he was also worried that the typical approval process from the government side could take years. “Normal protocol for the government to approve a wagon could be up to 3-4 years.”
Fair weather friends or not?
While carmakers and logistics providers expressed a desire to see more done by the railways, Kumar questioned whether the automotive industry would remain committed to using rail transport. She said that she had seen a drop off in interest in rail from OEMs this past year as a slower market has perhaps eased some of the immediate issues the industry was facing.
But Tata’s Prem Verma reaffirmed that the automotive industry “was not a fair-weather friend to the railways. We want to use the railways by design and not by default, and even in some tough conditions in recent months we made the decision to continue to use the railways.”
Both Kalsi and Verma also told Automotive Logistics that while it was disappointing that the autohub policy was on hold, the fact that Kumar and the railways had nevertheless expressed increased interest in developing automotive rail was encouraging for the sector.
Pictured from left to right are: Suhas Kumar, Ministry of Railways; Nidhish Kuchal, Mahindra & Mahindra; Vipul Nanda, Mercurio Pallia; Robert Bommers, BLG Logistics; and Achal Paliwal, Honda.