India railroad will now assess 'port congestion' surcharges

India railroad will now assess 'port congestion' surcharges

Indian shippers, already facing a wave of surcharges tied to landside congestion at major ports, received another blow this week when the federal government issued a decree allowing Indian Railways to charge a “port congestion surcharge” for cargo moving to inland distribution points.

“Sanction of the central government has been accorded to levy of port congestion surcharge of 10 percent on base freight rate. This surcharge will be levied on all goods traffic, including containers, originating from the ports,” an official statement said.

The surcharge, which is expected to push up freight costs substantially, came into effect on Nov. 24.

The move comes in the wake of a surge in import volumes at major ports in recent months, putting severe pressure on the intermodal rail connections. Containerized imports moving via India’s 12 major state-owned ports in October were up nearly 17 percent from the same month last year and were up roughly 11 percent in April-October versus the prior year, according to the latest statistics available from port authorities. Year to date total throughput at the six largest India container ports, including Nhava Sheva, the largest port, was up 7.6 percent during the April-October period versus a year earlier. 

“At the rate which it (imports) is growing, there is no other option but to recover this cost through the surcharge,” the statement said.

Over the past several months, importers have been dealing with delays in merchandise arrivals due to intermodal troubles and higher inland transportation costs following the imposition of “on-carriage surcharges” by most ocean carriers affected by low berth productivity and equipment shortages. These surcharges range from $125 to $225 per 20-foot-equivalent unit, or TEU, for cargoes discharged at the Nhava Sheva terminals at Mumbai, which accounts for about 60 percent of India's total container volumes.

A sizeable portion of India’s freight, particularly containerized goods, moves by rail, given the cost advantage vis-à-vis roadways and ease of handling. The pace of containerization of commodities has gained momentum in recent years following the entry of private players in the intermodal sector, which was a monopoly of the state-owned Container Corporation of India until 2006.
 
Inadequate port connectivity is a major impediment to India's trade growth, and the new Narendra Modi government, which completed six months in office on Nov. 26, has already lined up massive investments via the "sagar mala" project for transport infrastructure development.

Indian Railways carried 621.66 million tons of freight traffic from April through October, the first seven months of fiscal year 2014-15, up 4.79 percent year-over-year.