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MT’s Desk

                                           ENCASHING THE EMPTY

Encashing an empty wagon is the name of the game. That is the business Railways have been doing all along and that is what they should do. This is what all transportation businesses are supposed to do. Encash your assets; and wagons are costly assets. The attempt all along has been to utilize this precious asset to the maximum so as to reap full benefit from the investment made. However, the way business exists, it may not be possible to have wagons running loaded all the time. There will be occasions when it will have to be moved empty for some distances since the mismatch between, where traffic is offered and where it is unloaded, will bound to take place. So the effort should be to minimize this distance to the barest minimum. For doing so a lot of mathematical models have been worked out and now computer simulations exist. Experience teaches us the flow patterns and wagon optimization.

The underlying idea is to map the demand patterns and the movement patterns of wagons and find the near-ideal solution. This is the process we on IR have been following and doing a good job of it. Our daily effort, at the junior most level, the cutting edge level, is planning this optimization by experience or with the help of the computer programmes. However, this is only dealing with a few parameters of traffic optimization which obviously will give only limited results. And that has been a part of the problem which is coming in the way of IR getting more out of improving wagon utilization.

We need to understand "demand" which we are trying to meet/ optimize. Demand is a market-driven phenomenon based upon all the factors of an open market. It consists of peaks and troughs, external stimuli, pricing, competition, technical innovation and costs. It is driven by two major factors- cost reduction and profit maximization. It is not driven by wagon availability but cost of service. This has never been factored into IR's demand optimization effort at the cutting edge level i.e. the Division, the unit dealing with such an important issue. Hence, the mismatch. With the best of effort, the parameter of pricing has not been directly delegated to the Divisional level. Demand and pricing have a very close relationship.

Pricing of services have always been centralized at the corporate level in many organizations specially Government-run organizations. It has a logic which is irrefutable but simultaneously, has its drawbacks. IR is no exception. Realizing this limitation, attempts have been made to delegate some powers to Divisions, but more to Zones, to grant concession on the price dictated by the corporate office, the Board. Granting of Volume-based discounts, station-to-station rates and finally empty flow discounts were some of the schemes which were introduced and powers delegated to the Divisions. But all these schemes met with little success. The primary reason was that the procedures were complex and the implementation more difficult for the person implementing the scheme and confusing the user. The schemes had other drawbacks of fixing a benchmark since the scheme was only for incremental traffic. The basic fear underlying all these schemes was to prevent full-fare traffic getting converted to concessional traffic. It had no correlation to cost of haulage even of empty. This has been the basic flaw of every scheme that it had no correlation to cost of haulage and pricing of services. It also had no relationship to commodity and the packet size, i.e., full rake or less-than-full rake. While this should have been the underlying philosophy.

Now a new scheme has been framed whereby empty flowsare being tapped. IR has an empty return ratio of slightly less than 50% of the total flows. In effect it means that half the wagons running at any point in time are empty. This is an expensive prospect for an organization procuring 13000+ wagons a year, and then running half of them empty. The scheme started developing, when the cost of haulage of an empty and a loaded train was established from the official published figures. The difference between the two was sufficient margin to provide attractive discounts. But that would have been too simplistic. When, and if, an empty gets converted to loaded the haulage cost goes up. Added to this is the other miscellaneous costs attached with a loaded train, like the terminal detention cost, etc. which are not in the empty haulage cost. The net difference was now the margin on which a concession could be worked out. To make it more complex, there were instances of other discounts due to some customers by virtue of earlier commitments, e.g., volume discount, wagon investment scheme. The issue was whether these discounts could become concurrent with the discounts under this 'costing' scheme. Calculation showed that it could so. A base minima was worked out [class-95] below which all discounts put together would not go. This was made a part of the scheme. Next in the costing analysis was the money value for different distances so as to arrive at a near-accurate revenue which would accrue to IR. This NTKM [Net Tonne Kilometre] basis was finalized for a minimum distance of 200 kms and was incorporated in the scheme.

Having worked out the costing and profitability concept, it was essential to assess the traffic availability. The basic question was to identify the traffic which would avail the benefit under this scheme. Luckily, studies of traffic flows of all commodities across the country had been compiled by Planning Commission. This included traffic moving by all modes of transport, rail, road, coastal shipping, inland waterway and air. This gave a lucid picture of potential traffic. In fact it showed that mixed commodities [different commodities being loaded by a freight forwarder for a particular destination] was an area to be tapped. A rough estimate of the movement of trucks across State boundaries was also assessed for arriving at the traffic potential. This figure was also substantial. Similarly, traffic presently moving by containers was also seen as potential traffic since the rates of haulage, as discounted, would be nearly the same. It was clear that this was an area where such a scheme should be tried. There was all justification to test the market.

Another area which required deliberations was the type of commodity which could avail of this scheme. Logically it should have been all. But some traffic which were governed by separate allotment rules and processes, as well as those which would still be offered without discounted fare were kept out of the purview of this scheme. Traffic of imported coal was one such, iron ore being another. Similarly, RMC should obviously not qualify for discount. Added to this was traffic moving at highly subsidized rate, below the cut-off rate [Class-95], were also not eligible for further discounts. Computerization of data on IR [FOIS] came in handy. The stage was now set for implementing the scheme.

Next came the turn of attending to processes of implementation. This had been an area which had made the earlier schemes difficult to implement. It was decided that the process should be such that no human intervention would be required. IR has a strong backbone of interlinked computer terminals and a centralized data base. Any transaction having been made earlier [archival data] could be easily compared with current transaction. Once the 'benchmark', beyond which discounted fare would start, had been achieved, the computer system would do the rest. No request applications, no permissions and no monitoring would need manual intervention. All that is required to be done would be done by the TMS[Terminal Management System], which is a part of the FOIS. All that would need to be done would be to monitor exception reports-- and the success of the scheme.

So the stage was set and the scheme loaded on the website for all to see. The date of implementation was fixed for 1st October, 2014. All that is now needed is to popularize the scheme amongst potential customers and sensitize railway men.

They should drive this scheme to success.



                                                                                                                             MEMBER TRAFFIC


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