Stimulus-II: Lalu in sync with rest of UPA

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New Delhi: The day after the Centre announced its first set of fiscal stimulus measures in early December, the Indian Railways stumped industry by effecting a 8% hike in freight rates for cement, coal and coke – diluting the intended benefit of 4 % cut in Cenvat rates to some extent. A month later, the Lalu Prasad-led Railways ministry seems to be on the same page as the rest of UPA's economy managers, albeit for different reasons.

While the Centre announced its second stimulus package on Friday, the railway ministry has extended up to 50% freight discount for iron ore exporters. A similar cut could also be on the cards for steel and several other products as the Railways is comprehensively reviewing its freight rebate schemes in order to reduce charges wherever possible, by extending existing discounts. Significantly, the freight discounts coincide with the “busy season” of January to March, when goods transport by railways is in full swing, indicating that the ministry is concerned about its freight business targets.

While the move will boost trade and industry, the immediate imperative for the Railways is meeting its own freight traffic and revenue targets. In his Budget, minister Lalu Prasad had set a freight loading target of 850 million tonnes for 2008-09. But internal targets were hiked further with an eye on achieving Rs 100,000 crore in revenue surplus for the Railways under his watch – a number that he hopes to highlight in the upcoming general elections as an indicator of the railways' remarkable turnaround

The economic slowdown in recent months has put those targets in jeopardy. Till November this year, railways has carried 534.60 million tonne of revenue earning freight traffic, a 6.45% increase over the 502.19 mt traffic it transported during the corresponding period last year. In October, rail freight dropped by 0.14% to 66.08 mt, setting off alarm bells in the ministry. Following this, it had instructed general managers and deputy regional managers of zonal railways to ensure that monthly targets were met.

The Railways has already extended freight discounts of up to 50% for the movement of iron ore traffic for exports. It is also expected to provide a similar rebate for steel transportation as well and it also plans to continue existing incentive schemes in the remaining two and half months of 2008-09.