At a time when the Indian Railways and India Post are exploring ways to collaborate for parcel delivery business, the carrier is separately exploring options to tie up with e-commerce companies.
The railways has hired management consulting firm Technopack Advisors Pvt. Ltd to chalk out the contours for these tie-ups.
The parcel delivery business has seen a multi-fold increase in the past couple of years given e-commerce companies witnessing demand emanating from smaller towns and rural areas.
“We are looking at e-commerce business and are in talks with Amazon, Flipkart and Snapdeal. They are extremely keen for tie up. Amazon, for example, has fulfilment centers where you store products and they can be picked up from there. Trains are connected to all these centres and we can be the logistics partners,” a senior official at the ministry of railways said requesting anonymity.
The e-commerce sector in India is expected to grow to $119 billion by 2020 with a total of 320 million shoppers, according to a Morgan Stanley report. The railways plan to leverage the increased logistical requirement by e-commerce companies.
Though the railways and India Post—which already has tie with e-commerce companies for delivery of parcels given its huge network including rural areas—are exploring a possible tie up, the plan is getting delayed due to differences in opinion, as reported by InfraCircle on 16 September.
According to the official quoted above, the Indian Railways is targeting revenues of up to Rs.500 crore in the next three years through these tie-ups.
The railways have taken a slew of measures to increase its non-fare revenue and estimates advertising potential in excess ofRs.5,000 crore over the next few years. The carrier aims to increase its non-fare revenue from the current 5% to 10-20%.
“We can actually work as a logistics partner and go beyond that. We will offer them access to our passengers as well so that they can sell products on trains. Its huge money and according to Technopack, we are looking at Rs.300-500 crore in the next three years,” the official said.
The national carrier’s information technology wing, Centre for Railway Information Systems (CRIS) which develops technology solutions and applications for Indian Railway Catering and Tourism Corp. Ltd, is the technical partner to tap into passenger data available with the latter. The Indian Railways carries around 23 million passengers every day.
“Demand will be an important factor. We are offering them the entire railway network to transport products. We will create fulfilment centers at stations so that anyone can come and pick up products from there. They can also come up with a model of their own. If we deliver goods at the fulfilment centres, companies can have local people deliver products,” a second railway official said requesting anonymity.
The official added it reduces logistics cost for the e-commerce companies as well.
Queries emailed to the spokespersons of Snapdeal, Flipkart, Technopak and the railway ministry on 16 October, and the ministry of communications and information technology, under which India Post operates, on 17 October remained unanswered. An Amazon spokesperson, however, denied being in talks with the railways.
According to experts, the railways should analyse the business model for this carefully.
“The railways should evaluate whether it is worth the time and money and it could do it on an experimental basis. All these initiatives are fine but let railways not forget that unless they play the role of a national logistic aggregator, their freight traffic will not increase. And it must increase their freight basket,” said former Indian Railways’ Accounts Service officer Akhileshwar Sahay.