Freight Subsidy Needed to Soothe High Freight Cost for Engineering Goods Exporters in HP, Uttarakhand

High logistics costs weigh heavily on the engineering goods exporters and unavailability of containers have added to the woes of manufacturers based out of Himachal Pradesh and Uttarakhand. The exorbitant freight rates could render the industrial units in these states uncompetitive not only against the domestic peers but also in international markets, said EEPC India Convener (Baddi Chapter) Mr Arun Shukla.

Transport cost for manufacturers in land-locked states of Himachal Pradesh and Uttarakhand is estimated to be 5-6% higher compared to those based in states closer to seaports.

Among the suggestions to lower the transport cost for industrial units in the two states, he proposed freight subsidy by state governments, extending rail freight network and ramping up the capacity at existing dry ports.

"Being away from the sea ports we are competing with companies in the coastal states. The high freight cost lowers our overall profit margins in the international market preventing us from going for capacity expansion. It is increasingly becoming difficult for us to penetrate into new markets," said Mr Shukla.

He noted that the dry port in Baddi is currently not fully functional and availability of containers remains an issue affecting the export consignments.

"We have approached Container Corporation of India (CONCOR) and other concerned agencies to resolve the issues at the dry port and ensure smooth movement of at least export cargo. Majority of the industries are facing the issue of containers," said Mr Shukla.

Speaking at CONCOR and EEPC India virtual joint session on Threat and Challenges in Logistics for Engineering Exporters, Mr P R Parhi, CGM (C&O), CONCOR said that rail connectivity is yet to arrive at Baddi and it is the only road-linked Inland Container Depot (ICD).

Mr Pankaj Gupta, Convenor (Dehradun Chapter) of EEPC India said that ICD should be developed by CONCOR as a logistics hub and multiplicity of activities should be planned around as is the case globally.

He highlighted the shortage of containers, skilled manpower and deficient infrastructure leading to poor service delivery and cost over-burden.

Mr. Rajiv Aggarwal, Senior President, Baddi Barotiwala Nalagarh Industries Association (BBNIA) noted that transport cost needs to be brought down for the industry to compete globally.

"Freight rate from Baddi in Himachal Pradesh to Mumbai is higher than from Mumbai to Dubai. Exports cannot be competitive unless logistics cost is under control," said Mr Aggarwal, emphasizing that cartelisation by truckers' union in the Baddi area had been one of the reasons behind high freight cost for local industry.