Rail Budget 2016: Suresh Prabhu, in his second rail budget announced to make a 'rail auto hub' in Chennai will give Tamil Nadu a shot in the arm.
At a time when Gujarat has been gaining popularity as a destination for setting shop by automotive players, the announcement made on Thursday by Railway Minister, Suresh Prabhu, in his second rail budget to make a ‘rail auto hub’ in Chennai will give Tamil Nadu a shot in the arm.
Chennai’s proximity to robust port logistics, well structured infrastructure, good labour and power supply are just some of the factors that made the capital city of Tamil Nadu popular with automotive manufacturers for establishing their businesses in that geographical area. Lately though, labour unrest, real estate costs, and even shortage of power in the industrial setup have forced the auto companies to look beyond Chennai for their operations. Despite big names like Hyundai, Ford, BMW, Nissan, Renault and Yamaha, and allied partners, the vibrancy of Tamil Nadu as an automotive destination was going down.
In an effort to build terminal capacity, there will be a great focus on providing last-mile connectivity for the freight business that will reduce costs associated with logistical operations. Suresh Prabhu elaborated saying, “Inadequacy of warehousing and transportation facilities is also one of the causes that that keep potential customers away from the Railways. In order to complete the chain of transportation, it is proposed to develop Rail side logistics parks and warehousing. These logistic parks and warehouses would be created in PPP mode to bring the required efficiency and investment but also help attract greater traffic to the Railways. With the coming in of TRANSLOC, the Transport Logistics Company of India, we will be witness to a paradigm shift in our role as a national logistics provider.” He also mentioned that India’s first rail auto hub will be inaugurated in Chennai soon.
Atul Chandel and Nidhi Singh, expert analysts at Autobei Consulting Group, gave a thumbs up to the move and said it will solve some logistical issues that are faced by the manufacturers. “It’ll give better connectivity between rail hub and ports,” says Chandel, adding, “there is a focus to make India an export hub by different manufactures due to its geographical location and cost effective production. To select Chennai is also strategic decision since most of the OEMs and suppliers have manufacturing units in that region. This would not only save time but will also provide easy channel for export.”
Nidhi Singh said, “In Germany, railways provide pick-up facility inside the factories of BMW, Audi, Daimler etc. Trains directly pick vehicles from factory platform and export to the European region. It is a very effective way of using rail-transport for export. There are special train for this application which have special equipment to carry vehicle on trains.”
“In 2015 two-wheeler export registered de-growth of 0.69%, while passenger vehicles went down 1.16%, and commercial vehicle and three-wheeler segments dipped by 13.24% and 4.42% respectively. We expect exports of all verticals to increase minimum by 20-25% in next 2 to 3 years,” she added.
The auto industry seems to be unanimous in its support towards the announcement of the rail auto hub in Chennai.
President of Nissan India’s operations, Guillaume Sicard, said, “Chennai is one of the major auto hubs in India and needs efficient and cost-effective infrastructure and logistics support. With the rail auto hub, it will be a much-needed shot in the arm for economical, timely and efficient transportation of our cars to the port and will aid our export strategy immensely.”
Sumit Sawhney, CEO & MD, Renault India Operations, applauded railway minister Suresh Prabhu’s Chennai rail auto hub announcement. “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,” he said.
Ford India, in a comment over the Rail budget, said, “As part of the automotive industry, Ford has been advocating first and last mile connectivity in multi-modal logistics as a key focus area of the infrastructural development. The announcement of Rail Auto Hub in Chennai, therefore, is significant and would help southern auto OEMs to improve their Logistical multimodal efficiencies significantly. The Auto Hub will encourage transportation of cars through railways, thereby offering a greener logistical solutions through decongestion of Road traffic.”