Chennai to get first rail auto hub, industry welcomes move

The Railway Budget 2016 announced by Railways Minister Suresh Prabhu today should come as a breather to the automotive industry as it offers a number of sops to the industry. The first rail auto hub is slated to be set up at Chennai. Not surprising as the southern city is one of the important automotive hubs for several leading passenger car, two-wheeler and commercial vehicle manufacturers as well as auto component makers.

In addition, there are plans to establish rail-side logistics parks and warehousing facilities in private public partnership mode to step up efficiencies in rail traffic.

In fact, the majority of the vehicle manufacturers in the country today use more of road transport to despatch their finished cargo – cars, two-wheelers and commercial vehicles from manufacturing plants to retail outlets or ports of call. Use of the rail network is minimal as most of their manufacturing facilities are yet to get rail sidings from factories to major destination points.

Waterways also contribute a small portion of the overall transportation with the southern automakers mostly leveraging the facilities at Chennai Port and Ennore Port for overseas shipments.

The Railways has, for some time, contributed a small portion of the freight carriage though market leader Maruti Suzuki India took a lead by getting special rakes developed for its freight carriage.

For Maruti Suzuki rail transport constitutes less than 5 percent of its total domestic sales with the balance handled by road transport.

In comparison, Hyundai moves around 1 percent of its sales by rail in India and that too mainly to the North-East where there is a saving in terms of transit time of about nine days.

Ford India has been struggling a bit on its logistics front as well. In most of its global locations, the American carmaker has a direct rail link to its manufacturing facility. In North America, about 70 percent of its bulk volume of cars is moved by rail, but in India it is still trying to work out an affordable solution for rail through improved density of cars transported per carriage.

In March 2014, Maruti and the Indian Railways flagged off a new high-capacity railway rake named Flexi deck auto-wagon to facilitate faster and flexible rail transportation of cars. This rake with 27 wagons has a 20 percent additional capacity for transporting cars compared to the existing twin-decker rakes that can carry 265 cars via rail. Maruti in fact has been using the rail transportation mode for over two decades leveraging the double decker container trains for transporting export vehicles from its manufacturing facilities in Delhi-NCR to the Mundra Port in Gujarat.

Now rail freight is set to get a further fillip with the new announcements.

SIAM LAUDS RAILWAYS BUDGET
Apex industry body, the Society of Indian Automobile Manufacturers (SIAM) has welcomed the Railway Budget announced by Suresh Prabhu, Minister for Railways, saying it aims for consolidation under trying times with no increase in fares or freight rates. SIAM has also lauded the minister’s announcement of setting up of a rail auto hub in Chennai.

SIAM says it has been in dialogue with the Ministry of Railways and conveyed that the automobile industry would be happy to use the railways as an alternative means for transporting finished vehicles from the production locations to the key consumption centres across the country.

As a clean and efficient solution, the Railways need to emerge as a viable and economic alternative logistics option. The Railway Minister’s announcement that an auto hub would be shortly inaugurated in Chennai is therefore a very welcome development, said Vinod Dasari, president, SIAM

The involvement of the Transport Logistics Company of the Railways can provide first-mile and last-mile connectivity between OEMs and dealers, thus providing end-to-end logistics solutions for the automobile sector, said Dasari.

SIAM said that it also encouraging to see many of its other recommendations being taken in consideration in the Railway Budget, which includes rationalisation of freight structure, long-term tariff contracts for key customers, rail site logistics parks and warehouses for loading and unloading facilities and availability of timetable for freight trains.

Vehicle manufacturers too have welcomed the Railway Budget. Sumit Sawhney, country CEO and managing director, Renault India Operations, said: “The Minister of Railways, Suresh Prabhakar Prabhu while presenting the Railway Budget 2016-17 in Parliament announced the plan to soon inaugurate India’s first rail auto hub in Chennai, in order to facilitate transportation of cars from manufacturing plants to their respective destinations. The Railway Budget also proposes to develop railside logistics parks and warehousing in PPP mode to bring the required efficiency and investment to help attract greater traffic to the railways. This is indeed a welcome move as it will bring in significant efficiencies and reduction in logistic costs for many automobile OEMs in and around the Chennai region including us.

"Chennai is a growing automobile hub and is being regarded as the Detroit of the East. This will also achieve the prime minister’s vision of integrated planning and cost optimisation of the transportation network, generate additional employment and revenues in the state,” Sawhney added.

Meanwhile, Sanjiv Paul, head - manufacturing, India Yamaha Motors, said it's a positive move for the auto industry, especially for vehicle manufacturers based in the auto hub of Chennai.