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Demurraging the image of Indian Railways

Demurrage is the penalty levied on the user when the free time for loading/unloading goods from the rake has expired, causing detention at the terminal.

Demurraging the image of Indian Railways

By Palak Passi & Viral Joshi

One of the key irritants for the customers moving their cargo by rail is the demurrage charge imposed by the Indian Railways (IR). Demurrage is the penalty levied on the user when the free time for loading/unloading goods from the rake has expired, causing detention at the terminal.

At the time of arrival of the rake at the destination station, the consignees must pay the freight and other miscellaneous charges as per the Railway Receipt. However, demurrage charge is imposed to ensure rakes are released quickly after loading/unloading within a reasonable allowed time. 

Earlier, demurrage charges were levied @Rs 150 per wagon per hour for detention of rake beyond permissible hours.

Depending on the type of wagons, the permissible free time for loading may range for 5 hours to 7 hours for mechanized and 5 hours to 11 hours when manual operations are involved, while for unloading it may range from 2.5 hours to 9 hours when mechanized and 4 hours to 11 hours when manual operation is involved.

For levy of demurrage charge, the entire group of wagons is treated as one unit for loading/unloading.

The primary cause of demurrage is the slow unloading of goods. The unloading activities at rail terminals in India are primarily dependent on manual labour, particularly commodities such as cement, fertilizer, and foodgrain, which account for 19% of the total freight carried by IR.

Though majority of the terminals are functional 24×7, the unavailability of labour at night hampers the unloading activities, thereby exceeding the permissible free time. In the Northern and Eastern regions, labourers windup their operations before sunset due to safety concerns. Whereas, labourers in the Western region such as Mathadi workers in Maharashtra, abide by the rules of the labour union and work till 8 pm.

For most of the terminals in East Central Railways, two sets of labours are employed for unloading loose and bagged commodities, separately. In case two rakes with similar commodities are placed due to a shortage of labourers, one party suffers the demurrage.

Additionally, manual handling is not efficient enough and factors such as slow pace of labourers, unfavourable weather conditions, festivals, etc., hinder the optimal utilization of the permissible free time. These factors restrict the unloading process and ultimately, the consignee pays the demurrage.

Railway goods sheds are primarily located near railway stations, which are in densely populated and congested areas of the city. Often, the consumption centre/storage space for the unloaded goods is located at a farther distance.

Evacuating goods at the very moment from the rake is difficult as regulatory system for the movement of trucks in the city is restrictive. While the warehouses do not operate at night-time, the state governments have imposed restrictions on the movement of the freight vehicles during day-time. 

In some cases, the goods are unloaded on the wharf; however, the evacuation of goods takes time. Meanwhile, if another rake is placed on the same line, the unloading of goods cannot begin as the wharf or platform is occupied. 

The customers are usually not informed about the wagon placement at the terminal as the railway’s role is mere provision and placement of rake. The customers are themselves responsible for staying informed about the placement of rake and the loading/unloading activities.

Whereas, other aspects such as labour and natural causes are beyond their control.  Though the railways ensure a system of waiver of demurrage, it becomes restrictive and the ‘take it or leave it’ aspect becomes a major irritant for the customer.

A notification regarding demurrage charges in September 2022 gave a new perspective to the 2016 policy as the base rate was revised and increased significantly depending on the number of hours of detention.

The rate is applicable up to 6 hours. Further, penal demurrage could be imposed in case of high congestion at the terminal which may be up to a maximum of six times the base rate. However, it can merely be implemented after wide publicity and a notice of 24 hours at the terminal.

The policy also aims at processing application for waiver through CRIS in a time-bound manner as per the Schedule of Power resting with the competent authority.  

Apart from these substantial changes, the debit/credit scheme of demurrage which was introduced in 2016, has been discontinued at all freight terminals i.e., goods sheds, private sidings, Private Freight Terminals, and Engine-On-Load terminals.

The scheme used to give non-refundable credit hours to the customers if they handled wagons in less than permissible free time and was rather a customer-oriented initiative.

Total logistics solutions for the freight consigners will not only ensure unloading within free time, but also result in an increase in the freight traffic. One such example is that of Central Rail Warehousing Corporation (CRWC), which has developed warehousing facilities and provides total logistic solutions at around 20 railway terminals.

Replicating similar services at other terminals dealing heavy traffic may help customers by minimising unloading time. IR is charging exorbitantly high penalties, which would drive away customers and commodities from rail. 

Introduction of a strict policy without augmentation of line capacity or provision of adequate stacking space for the customers is problematic.

Demurrage may or may not be the customer’s fault and therefore should be tackled in a systematic manner wherein either the railways should take responsibility of informing and assisting the customer or a prime organization/third party should be placed at the terminal responsible for all terminal-related activities, including coordination with customers.

Further, mechanization at the terminals would enhance operations by reducing loading/unloading time, ultimately reducing the turnaround time. Without investment in line capacity, storage capacities and access roads, railways will find it difficult to achieve the target of 3000 million tonne by 2027.

Authors are Research Associates, Transport & Urban Governance Division, TERI.

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First published on: 06-10-2022 at 09:02:29 pm