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http://www.kotaksecurities.com/pdf/dmb/MorningInsight21032012.pdf
LOGISTICS
Indian Railways hike rail haulage yet again by 20% - to impact
volumes for container rail companies
1. Indian Railways (IR) has yet again increased the haulage rates by 20% for four
commodity categories. This four categories include Cement, Iron and Steel , Alumina and Petroleum (POL) products effective 1st April 2012
2. The previous hike railways took was in December, 2010 which had impacted the
domestic volumes for all the container rail companies.
3. The move by railways is considered as a deterrent by railways for rail container
operators to stay away from commodities hitherto reserved and cash cow of railways. Railways already have the monopoly to move minerals and coal.
4. We have spoken to the management of Gateway Rail and Arshiya to analyze
the impact of the same. For Arshiya and Gateway Rail these four commodity
categories constitute about 15 to 20% of their respective rail business. Companies are confident that they would be able to pass on the hike to the customers.
So there won't be any significant negative impact on the profitability.
5. We also learnt that the above mentioned commodity categories moved by container train companies form a very small percentage (1 to 2%) of overall volumes of railways. Hence we don't consider container train operators to be serious threat to railways in these commodities.
New haulage structure (Rs/TEU on Mumbai Delhi route = 1700 km)
Commodity Category Current haulage New haulage % change
Cement 39,139 47,721 21.9
Iron and Steel 46,969 57,265 21.9
POL 52,186 63,628 21.9
Source: Ministry of Railways
Increase in tariff by container rail companies can be significant
We estimate that the tariff hike by container rail companies to be significant as rail
haulage forms almost 75% of the tariff charged. This would certainly impact the volumes (both domestic and Exim) for container rail companies as customers may stop
using this as preferred mode of transport based on high cost of transportation. Business may shift to roadways, coastal shipping, or even Indian railways.
Earlier the railways in December, 2010 had hiked rail haulage on
same commodities by 20 to 25%:
n The haulage on container traffic was hiked on domestic and Exim routes in respect of selected commodities, namely Cement, Stone (other than Marble), Iron
& Steel, Alloys & Metals and POL products effective January 2011.
n This hike had impacted the domestic volumes significantly for companies like
Concor
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/dmb/MorningInsight21032012.pdf
LOGISTICS
Indian Railways hike rail haulage yet again by 20% - to impact
volumes for container rail companies
1. Indian Railways (IR) has yet again increased the haulage rates by 20% for four
commodity categories. This four categories include Cement, Iron and Steel , Alumina and Petroleum (POL) products effective 1st April 2012
2. The previous hike railways took was in December, 2010 which had impacted the
domestic volumes for all the container rail companies.
3. The move by railways is considered as a deterrent by railways for rail container
operators to stay away from commodities hitherto reserved and cash cow of railways. Railways already have the monopoly to move minerals and coal.
4. We have spoken to the management of Gateway Rail and Arshiya to analyze
the impact of the same. For Arshiya and Gateway Rail these four commodity
categories constitute about 15 to 20% of their respective rail business. Companies are confident that they would be able to pass on the hike to the customers.
So there won't be any significant negative impact on the profitability.
5. We also learnt that the above mentioned commodity categories moved by container train companies form a very small percentage (1 to 2%) of overall volumes of railways. Hence we don't consider container train operators to be serious threat to railways in these commodities.
New haulage structure (Rs/TEU on Mumbai Delhi route = 1700 km)
Commodity Category Current haulage New haulage % change
Cement 39,139 47,721 21.9
Iron and Steel 46,969 57,265 21.9
POL 52,186 63,628 21.9
Source: Ministry of Railways
Increase in tariff by container rail companies can be significant
We estimate that the tariff hike by container rail companies to be significant as rail
haulage forms almost 75% of the tariff charged. This would certainly impact the volumes (both domestic and Exim) for container rail companies as customers may stop
using this as preferred mode of transport based on high cost of transportation. Business may shift to roadways, coastal shipping, or even Indian railways.
Earlier the railways in December, 2010 had hiked rail haulage on
same commodities by 20 to 25%:
n The haulage on container traffic was hiked on domestic and Exim routes in respect of selected commodities, namely Cement, Stone (other than Marble), Iron
& Steel, Alloys & Metals and POL products effective January 2011.
n This hike had impacted the domestic volumes significantly for companies like
Concor
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