Shock for shippers as boxed railfreight attracts peak season
surcharge for first time


Indian exporters and importers face a major escalation in logistics
costs after it was announced that from 1 October the traditional
“busy season surcharge” would now include containerised
railfreight.

Traditionally, container railfreight has been exempt from October-to-
June peak season surcharges, industry sources told The Loadstar, and
the sudden and unprecedented introduction of the new tariff was a
shock to the sector.

The 10% surcharge will run until further notice, said Indian Railways
(IR).

Any price revisions implemented by IR inevitably trickle down to be
added to rates applied by container rail operators, such as Container
Corporation of India (Concor), and private intermodal service
providers, as the network infrastructure is government controlled.

The unusual announcement drew sharp pushback; the Association of
Container Train Operators (ACTO) called for an immediate retraction,
or otherwise a three-month reprieve.

“By including containers under the busy season surcharge, selective
discrimination has been made against the container sector,” said
ACTO in its appeal to the government.

“It is our contention that the container sector will continue to
provide the maximum long-term potential for cargo migration from road
to rail, but such discriminatory and cost escalatory initiatives will
only work to drive traffic away from rail,” the group warned.

ACTO president Manish Puri told The Loadstar the price hike would
have “costly repercussions” for container train operators trying to
consolidate modal shift from road to the more sustainable railways.

“It will have an immediate impact on the health of the business,”
said Mr Puri. And he added that “the road sector does not face any
seasonal surcharges (if at all, it often benefits from off-season
discounts)”.

According to ACTO, because there is also no waiver for empty
equipment moves – often incentivised to keep cargo flowing seamlessly
– this would compound concerns over potential price differentials
between the modes. It said: “At a time when road costs have been
dropping and service quality getting better due to improved road
conditions, this increase in cost will lead to the rail sector
becoming uncompetitive.

“Efforts to develop domestic circuits where some extent of empty
moves is built into the business will also be severely impacted.”
ACTO added.

Sunil Vaswani, executive director of the Container Shipping Lines
Association (CSLA), also voiced serious concern. He said: “This
announcement is indeed shocking. This sudden increase should be
revoked, or at least postponed for the benefit of the trade.”

Ultimately, the haulage hike gets rolled into the carrier ocean
freight rate, negating any line-haul cost gains for the cargo owner.
Container lines have already told customers that the 10% surcharge
will trigger a haulage rate hike for ICD (inland container depot)
volumes.

A 20ft ICD move from Delhi to Mundra earlier cost the shipper
IR19,000 ($230) and IR38,300 for a 40ft haul, on average, according
to industry data.

Indian Railways ended its fiscal year 2022-23 on an upbeat note, with
freight volumes hitting a new high, thanks to modal shift efforts and
targeting new commodities.

Indian inland supply chains are on the cusp of a game-changer with
the commissioning of the long-awaited dedicated freight corridor
between the northern hinterlands and west coast ports, such as
Mundra, Nhava Sheva and Pipavav.

But soaring haulage rates and ad-hoc charges imposed by some
container terminals remain a source of concern for rail operators and
cargo owners. To amplify the context, following trade pressure,
Adani Ports last year recalled its trade notices imposing extra user
fees on container trains operating to/from Mundra Port.

Meanwhile, Indian importers have received some tax relief as the
government has removed a 5% GST (goods and services tax) on import
freight charges for shipments contracted on a pre-paid or cost and
freight (C&F) basis.

But the discontinuation of GST exemptions for ocean/air freight
charges for export cargo continues to be a pain point for the
industry.

You can contact the writer at angelo@theloadstar.com.