Kenya Railways might be forced to further reduce rates on the standard gauge railway freight trains for the service to be competitive, stakeholders in the logistics sector said on Saturday.
Express Shipping and Logistics Limited CEO Silvester Kututa said for the freight trains to attract importers who already have existing contracts with transporters, the rates must be lowered.
“Importers are enjoying generous discounts from transporters and to lure them and attract high volumes to be designated to the Inland Container Depot (ICD), their rates will need to be irresistible. We are talking of an offer of up to Sh30,000 for the 20 foot container,” he said.
KR started commercial operations of freight trains on the SGR track on January 1 and is charging Sh50,000 and Sh70,000 for the 20 and 40 foot container respectively from Mombasa Port to the Nairobi ICD.
But importers have to spend between Sh15,000 and Sh20,000 on the last mile transport to industries within Nairobi depending on the distance from ICD.
With transporters charging between Sh60,000 and Sh80,000 to ferry the 20 foot container from the port to the door step of the importer in Nairobi, KR has faced challenges getting enough cargo. After the first train ferried 216 containers, the second one was delayed and left after two days.
“I believe that even with a rate of Sh30,000 the corporation would still make money,” Mr Kututa added.
KR is operating freight trains with 54 double-stack flat wagons, carrying 216 twenty foot containers each with a total load of 4,000 tonnes.
The passenger train service whose Sh700 fare for the economy class is half the rates bus companies charge, has so far been successful since its launch in June last year.
Last week, KR managing director Atanas Maina and Transport and Infrastructure Cabinet Secretary James Macharia approved a three-month promotional tariff that would allow shippers to receive their cargo and containers returned to the port at a flat rate.
“The promotional tariff of $645 (Sh64,500) and $843 Sh84,300) for a 20 foot and 40 foot container respectively includes railage and other handling charges by shippers including the return of empty containers by Kenya Railways to Port Reitz Railway Station or the Port,” Mr Maina said.
Clearing and forwarding agents and importers had raised concern that return of containers was not factored in their agreements with KR.
However, stakeholders say return of containers has its logistical challenges that need to be addressed. While the containers are supposed to be returned at a yard designated by the shipping line in Mombasa, the trains will deliver them at the Port Reitz martialing yard. They will then be transported to the shipping line’s yard at a cost.
“These nitty-gritties of the entire logistic chain should be addressed holistically,” said Juma Tellah, Kenya Ship Agents Association executive officer.
The trains have however been hailed for their speed in delivery of cargo.