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Higher tariffs on cargo transport by the standard gauge railway are likely to have a negative impact on repayment of Chinese loan as road carriage now becomes cheaper than use of train following implementation of new rates.
Logistics firms, which had mainly been reduced to offering last mile connections, are worried that SGR cargo business will now become uncompetitive with the new rates, which will cut the volume of cargo transported by railway in favour of road, hence impacting on revenue.
The new rates, which are now 79 percent higher compared with the promotional charges that have been in place since the advent of SGR cargo business, will also have a negative effect on consumers as manufacturers are going to increase the cost of goods in line with the higher tariffs.
Meshack Kipturgo, managing director of Siginon Logistics, says the cost of transporting cargo by road currently ranges between Sh85,000 and Sh95,000 for a 40 foot container compared with the new charges of SGR that will now be Sh100,000 for the same quantity.
“The new tariffs will simply make SGR uncompetitive considering that road transport will now be much cheaper, hence getting the bulk of goods meant to be ferried by road,” said Mr Kipturgo, whose firm uses both road and SGR in cargo transportation.
The cost of ferrying cargo on SGR will rise from Sh40,000 for a 40 foot container to Sh70,000.
However, there are other charges such as the last mile connection and return of an empty container that increases the fees to Sh100,000.
Rongai Workshop and Transport Limited Managing Director Vanessa Evans says the new tariffs implies that the cost of transporting cargo by SGR will now be higher.
Source: Business Daily