Railway minister Lalu Prasad?s reworked freight rates will probably leave India Inc no better off on transport costs than at the beginning of this fiscal. That?s because what the railway minister offered as rate cuts in last year?s Budget was promptly rescinded by circulars through the year.
The railway ministry has issued 11 circulars raising freight rates so far this fiscal?all coming after the Budget was tabled in Parliament. The ministry also issued some 100 circulars changing freight rate rules governing rebates and surcharges.
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 year?s 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% through circulars. A similar congestions surcharge of 20% was levied on traffic to Pakistan and Bangladesh via another circular.
The railways also introduced a terminal charge on all goods at railways-owned terminals and sidings at the rate of Rs 10 a tonne per terminal. This was later hiked to Rs 40 for all iron ore traffic. It also levied a development surcharge on goods traffic, which amounts to 2% of normal tariff rates.
Wharfage, demurrage and stabling charges were also revised upwards earlier this year. This is in sharp contrast to last year?s Budget proposal by the minister of introducing dynamic wharfage and demurrage policies as a cost incentive for companies. The plan was to provide extra free time for loading and unloading and also discounted rates, but the subsequent rise nullified most of this.
Steel and cement sector stocks firmed up on last year?s Budget announcements but iron ore traffic was the worst hit in 2007-08, with the railways levying a congestion surcharge, a busy season surcharge and a terminal surcharge on the commodity. In January this year, all types of iron ore were reclassified into the higher 170 freight class, which increased iron ore prices by Rs 10-13 a tonne.
Incidentally, the railway minister had re-classified all minerals, including iron ore and limestone, into class 160 from the earlier 170. He claimed the move had reduced freight rates by 6%.
The railways ministry, however, feels it is justified in making freight revisions after Budget announcements. ?Freight changes are not only about hikes but also discounts, and they are done based on market conditions,? a Railway Board official said.
However one former Railway Board member pointed out that technically such revisions are supposed to be part of the Rail Budget. ?But the dynamic commercial policy that they have announced can be used to revisit freight rates.?