Freight breather for oil companies

Written by fe Bureau | New Delhi, Feb 26 | Updated: Feb 27 2008, 04:17am hrs
Railway minister Lalu Prasads move to rationalise freight rates would give a breather to India Inc, particularly the oil companies. The ministers move to slash freight rate on petrol and diesel by 5% could see oil companies saving Rs 50 crore a year. In addition, freight rates on fly ash has also been reduced 14%.

Despite this, the Railways are expected to earn Rs 52,700 crore from goods traffic in 2008-09 over the revised estimate of Rs 47,743 crore in 2007-08, an increase of 10.38%. This is, however, slower than the nominal growth rate of GDP for 2008-09, which is expected to be 13%.

The Railways has also decided to spend Rs 75,000 crore in the next seven years on its bluechip programme of high-density corridors and other line expansion programmes. But there is no allocation for these in this years budget.

According to the minister, goods traffic is estimated to increase 60 million tonne over the revised estimates of 790 million tonnes for the current fiscal. Prasad said the target was 310 million tonnes of additional freight loading in the next three years, including a target to achieve 300 mt traffic for ports and 200 mt for steel, both by 2012.

That apart, the minister said barring a few light commodities, the highest rate would not be more than double the lowest rate. It has also been proposed that commodities that are not covered in goods tariff will be charged at a composite rate and not at the highest class rate as being done at present. The move is expected to increase freight basket of various commodities and attract piecemeal traffic.

Interestingly, freight rates, which were brought down last year, were revised upward throughout the year. The railway ministry issued as many as 11 circulars raising freight rates after the Budget was tabled in Parliament last year.

An analysis by FE shows that the railways levied a busy season surcharge of 4-7% during its peak transportation season on commodities such as iron ore, coke and coal. Last years Rail Budget initially proposed a congestion surcharge of 21% on all iron ore traffic to the sidings and goods sheds serving ports. This was subsequently raised to 35% and then to 60% via circulars. A similar congestions surcharge of 20% was levied on traffic to Pakistan and Bangladesh via another circular.