Freight challenge ahead for railways

China Railway Corporation has introduced reforms, aimed at improving efficiency and providing better services, in a bid to transform the company's freight transport into a modern logistics business.

CRC has good reasons to start its pilot reforms of freight transportation, as it not only has the responsibility for commercial operation of the railways, but also has taken on the debts of the former Ministry of Railways after the government dismantled the ministry into administrative and commercial arms in March. The audit report of the Ministry of Railways last year showed that the ministry had debts of 2.79 trillion yuan ($455.2 billion), and the debt ratio was 62.2 percent.

Although CRC's debt pressure is not that heavy compared with other State-owned companies in other industries, the ever-approaching debt repayment peak, which some experts predict is likely to come between 2017 to 2019, has forced the corporation to carry out market-based reforms in order to boost its profitability.

For years freight transportation has been a major source of railway revenues, but the volume of rail freight began to shrink in the second half of last year due to the country's economic slowdown and fierce competition from air and road freight carriers. From January to April, while the national freight volume increased, national freight shipments by rail dropped 1.5 percent year-on-year. So reform of freight transportation by rail was imperative for the newly born China Railway Corporation.

Compared with other means of freight transport, price is the railways' biggest advantage. However, extra charges arising from the multiple links in the whole transportation process increase the cost of rail freight transportation remarkably and undermine its cost advantage. Cheng Xiandong, head of the transportation bureau of CRC, said that in this reform the corporation will maintain the current low freight transportation prices, cancel the former multi-link charging model and set fixed and standardized prices for freight transportation, in a bid to regain its competitive edge.