REDEFINING BUSINESS WITH TECHNOLOGY

Kalyana Rama , CMD, CONCOR

For several decades now, the government and India’s largest container train operator Concor had attempted to make rail transport of cargo as popular and sought after as the road transport system. This time again, the State owned transporter has laid out a well-thought out strategy to woo cargo owners to move their wares on tracks than on mortar. The youngest-ever CMD of Concor, Kalyana Rama, who took over little over five months ago, is tech savvy, customer-oriented and futuristic. In a heart-to-heart with Ramprasad, Editor-in-Chief, Maritime Gateway, he details on the value addition Concor is offering its customers.

Q Tell us about your expansion plans and the “Vision 2020”?

 Today, Concor operates from 67 locations across India’s hinterland and in three other locations we have tie ups with CWC which takes the number to 70. We are adding at least another 9-10 locations by FY 2018 and we aim to be present in 100 locations by 2020. We have a strategic plan for this called “Vision 2020.” Out of these 100 locations 90 per cent will be owned by us. In addition to these, we are present at all gateway ports and in certain ports such as Paradip and Krishnapatnam, where we do not have a full fledged facility; we have developed a small facility for us to operate from. This is part of a new strategy to create smaller facilities as a precursor for our bigger facilities to come up. Thus far, we used to take 100 acres in a MMLP and develop it in a phase wise manner. Subsequently, we would start commercial activity there upon acquiring a customer base and focussing on marketing. But now, we have changed our strategy. For instance, at Krishnapatnam, we have begun identifying customers even as we develop our facility at the 145 acre site. So, by the time our phase I is ready, we will have our customer base and business ready. This strategy is being implemented at Paradip as well. We have taken a facility for developing a MMLP on 100 acres.

Q You have been batting for double stacking of containers. What is the progress on this front?

Today we are running double stack container trains between Khatuas- Mundra and Khatuas-Pipavav. These are the only sections cleared by Indian railways for double stack running and we are utilising them fully. However, double stack running is a different ball game and everybody has to get accustomed to it. Even my service provider and customer should know how to work with it. This is because the number of containers transported at a time will increase from 90 teu to 180 teu. But will every double stacker be 180 teu? How would we manage if we have 160 teu? To operate in situations such as these and offer solutions, we have developed a software.

 Khatuas is serving all the northern hinterland and we have got four big terminals here – Moradabad, Ludhiana, Dadri and Thughlakhabad (TKD). The fifth terminal is at Panipat. These five terminals keep feeding cargo into Khatuas. From each terminal, we have calculated the breakeven point in cargo we would need to achieve. For instance, from Moradabad if I get 110 teu, I am profitable at Khatuas. It has to be 120 teu from Ludhiana. So these equations are developed in the software itself. The 180 teu number is the optimum capacity, but if I cross 120 or 130 teu then for every teu I get an extra margin. Through this software, I have exports data at hand, but for imports, the ports maintain it. So, I am tying up with ports to help them provide information to me in the electronic data interchange format. The primary data report is the IGM for the ship, which the ports will share with me. The IGM will tell me which containers are destined for my ICD. In turn I will provide the ports with train wise boarding list.

Presently when containers arrive at the port they are discharged and put in the container yard. When I place the train they shuffle and load them. But when I provide them train wise loading list that will eliminate the shuffling process and efficiency will improve. In port operations every move is a cost to them and I am removing 100 per cent moves for them.

Q With the double stacking formula can you divert cargo from road to rail?

 We started our double stack operations in 2014. However, during all quarters in the years 2015 and 2016 we were doing only imports in double stacking. After I took over as Chairman of Concor we began loading export cargo on the double stacks too. I asked railways transit guaranteed services to create a timetable for freight trains in exim cargo. I asked for two scheduled trains from Dadri and TKD. In Dadri we were successful in capturing all the road traffic and it became a big success. By doing this we were able to prove that a) If you offer a quality product or service, there is always a market for it and b) With double stacks running we can compete with road transport. For the Dadri traffic, rail was `12, 000 costlier than road earlier, but with double stacks, we were able to reduce rates and offer services at par with the road transport. Yet, there was no transit guarantee. All the major customers such as Walmart, Target, JC Penny and many others asked for transit guarantee. Then I asked railways for timetabled trains from Dadri to Khatuas and TKD to Khatuas. Here, we used our market intelligence to our advantage. We know there is market and we know this is the congested section to be crossed. We quoted a price `4,000 less than road reducing our freight cost by `16,000. In three months, we moved the cargo and proved to the customers that we can reach the destination in 72 hours. Thus, we could divert the cargo from road to rail. From October last year, the train is running an uninterrupted service.

Q How is the railways gearing up to capitalise on this opportunity?

 The Railways is currently spending on asset quality and on removing bottlenecks. Once this is done, their capacity will double. So railways will have the capacity to run three times the trains and we will be using this with timetabled trains.

The factors affecting our business include the railways, their policies and the Indian economy in total.

 On March 2, the Railways Minister announced a freight action plan. In that meeting, everybody agreed that they were out pricing themselves in freight market. The second thing was the plan to go for long-term contracts with major customers, which means they are looking for some price stability programme. Another plus point for us is that most state governments are objecting to overloading of trucks. If overloading is stopped then rail becomes competitive.

Two good initiatives have come from the government – Make in India and Pradhan Mantri Kisan Kalyan Yojna. Our GDP is growing at 7 per cent, but the growth is happening more in the services sector. If the tertiary sector is growing, lifestyle of people in the service sector improves, but the population in primary and secondary sector is getting poorer. That is why the government has come up with these schemes: Make in India is for the secondary sector – manufacturing and the Pradhan Mantri Kisan Kalyan Yojna is for the primary sector.

With every 1 per cent growth in GDP, logistics sector grows by 1.5 per cent. But today because only service sector is growing with every 1 per cent growth in GDP only 0.5 per cent growth in logistics is happening.

Q How will the upcoming DFCs add to your advantage?

 Coming back to my Vision 2020, I have developed a double stack train along with IT system to support it. Once the Western DFC comes up in 2019, the train length will increase from 700 metres to 1500 metres and the number of teus will increase from 90 to 400 per train. Thus, our cost competitiveness will increase. With the DFC the transit time to port will come down from 72 hours to 20 hours. With these capabilities railways will give stiff competition to road.

 Now the challenge is, we cannot run 400 teu train from the port to a single destination or vice versa. So we are developing hubs along Western DFC. We are developing first hub in Baroda for Gujarat region, next hub will be in Swaroopganj. This is the point where trains from Mundra, Pipavav and JNPT will meet. We are looking for directional traffic from each port. Other hubs will be at Phulera and Khatuas.

In the Q3 FY 2016, we increased our freight share from 72.8 per cent to 75 per cent. This was achieved through double stack running and quick cargo clearance from the ports. We are concentrating on faster clearance of cargo at ICDs. We are working along with shipping lines to bring DPD into terminals and deliver.

Q Since you are leveraging on technology. Are you exploring the mobile platform as well?

 Every year we spend `1000 crore in capex. For every `100 on capex, `60 will be spent on terminal development, `30 on rolling stock and equipment and `10 on IT. We have tracking systems fully functional and at dry ports for inventory management we are doing a programme called KYCL – Know your container location. It is functional today at six depots and we will make it functional across India by FY2018. Customers can track their cargo from the time we pick up till we deliver it at the port.

 We have launched a mobile app so that a customer sitting anywhere can complete his booking. Today we are mostly in 2PL, but we are not into 3PL. Again in 2PL we are not strong in first and last mile connectivity. The reason is with us being a PSU, we have to go through a tender process to nominate a service provider. Now the efficiency of the service provider in turn affects my quality of service. Instead if we have a panel of 10-20 operators then there will be competition and we will be strong. A customer can post his requirement on the mobile app and the panel of operators will quote their rates. The application will decide on the operator and connects it to the customer. Thus the first and last mile connectivity becomes strong. This is planned to be achieved by FY2019.

Q Are you planning to get into 3PL as well?

Today Concor has 3.75 million sq ft of warehousing space and another 4 million sq ft warehousing is being developed at all 15 MMLPs. We are planning to start warehouse management (3PL) which will be hived off in to a separate vertical. We will offer complete distribution logistics along with invoicing. From customer satisfaction, Concor will move to customer value creation.

Q What are your plans on the east coast?

The east coast requires growth along with industrialisation. Consumer products manufacturing needs to pick up on the east coast. People say our logistics cost is higher, but our logistics cost per kilometre is not higher. In China the length of travel for a product before getting exported is very less compared to India. In India on an average, a product travels about 700- 800 km, but in China it travels only 300 km. This advantage can happen only if industrialisation comes on the east coast.

Q Which regions are giving growth for you?

Our growth is coming more from the North West belt, Tamil Nadu and Karnataka. Growth has to come from Odisha and Andhra Pradesh. That is the reason we are developing Paradip and Visakhapatnam, Kakinada and Machilipatnam. At Machilipatnam, I want to develop an integrated logistics manufacturing zone.

 Operational performance

 The operating turnover of Concor registered a growth of 2.82 per cent during FY 2015-16, increasing from `5,585.23 crores in FY 2014-15 to `5,742.58 crores in FY 2015-16. EXIM cargo handled at terminals dipped a bit from 26,21,385 teu in 2014-15 to 24,75,868 teu in 2015-16. Domestic cargo also declined a little by -8.40 per cent. In 2014-15, the company handled 4,89,371 teu, compared to 4,48,178 teu in 2015-16.