Wednesday, June 23, 2010

Indian Rail Freight Profits Encouraging

Tonnages Up but Revenues Even Higher
Shipping News Feature

INDIA – Deciphering the complexities of the state owned Indian Railways is always a daunting task for any analyst; the company is the country’s largest employer with a hierarchical management system and the necessity to distribute over 20 million passengers throughout a network of almost 7000 stations. What is not often realised is that these passenger services are heavily subsidised by the 2 million or so tonnes of rail freight which the system transports daily.

The figures recently released for freight transported during April and May this year are therefore not only important to the shipping sections of the company but for the overall health of the system. Traditionally around 70% of revenue for the railway have come from the carriage of cargoes varying from ores and agricultural products to finished goods and most profits come from this sector and are utilised to subsidise the traditionally cheap passenger fares.

The last recorded two months figures therefore do not appear spectacular recording as they do a year on year rise of 3.37% in tonnage carried, up to over 146.4 million tonnes. Although this is encouraging it is in line with other sectors of the shipping industry in much of the rest of the world after the trials and tribulations of last year.

What is more relevant is the revenue earned during the period which has leapt 8.99 percent against the same two months last year. During May alone income reached Rs 5,150 crore (1 crore rupee = 10 million rupees) 38% of which came from the carriage of coal, almost 34 million tonnes, and 15% from the near 10 million tonnes of iron ore carried.

Many freight customers and all primary ports have multi modal connections and If Indian Railways can push through the expansion of the network which has been proposed, and assuming the prosperity in the country means they can rebalance their passenger fares to realistic levels in the next few years a modernisation of the system may reap its own rewards as the railway regains much of the trade lost to trucks in the past decade.