With one eye on inflation and another on the reviving economy, railway minister Mamata Banerjee is likely to announce an increase in freight rates for commodities other than foodgrains and fruits & vegetables when she presents the railway Budget 2010-11 later this month. Key items on which freight charges could be increased are automobiles, iron ore and cement.
Prompting the move is a resurgence of the Indian economy from the global downturn, a government official in the know told FE. Last year, the minister did not raise freight rates, as profits of domestic companies were either stagnant or negative. ?It could not afford to do the same this year as it requires funds to finance passenger services,? an official said. The railways earns more than half its income from freight and most of it is used to improve passenger services.
Banerjee has already ruled out an increase in passenger fares in Budget 2010-11 while presenting a white paper on Indian Railways and ?Vision 2020? documents in Parliament in December. The railways? inability to achieve the freight earnings target up to January may have also contributed to the minister?s decision to hike freight charges for non-food goods. Freight earnings fell 2.26% short of the Budget proposal.
The railways earned Rs 47,763.29 crore from April 2009 to January 2010, against the Budget target of 48,868.76 crore, according to figures released on Monday. In terms of loading, for which data is available only up to December 2009, it surpassed the target by 1.93%.
The rail ministry has kept foodgrains and fruits & vegetables out of the list of items on which transport charges might be raised considering the runaway prices of essential items. Food inflation rose to 17.56% in the week ended January 23, against 17.4% in the previous week, according to the latest government data.
The departure from last year?s Budget may prove a setback for industry, which is already facing the prospect of a withdrawal of stimulus packages by the government. Finance minister Pranab Mukherjee hinted at a gradual unwinding of stimuli that the government provided since October 2008 and RBI has already withdrawn some facilities in the last two monetary policy reviews.
The economy is likely to expand by 7.2% in 2009-10, according to CSO advance estimates. The finance ministry projects growth at 7.75%. India?s GDP grew by 6.7% in 2008-09, against around 9% in the previous four years.