Barely a month before the Railway Budget is to be presented, the railway ministry has resorted to its dynamic pricing policy and cut freight for iron ore transported for domestic consumption.
The Railway Board has reclassified iron ore for domestic consumption to a lower freight category of 180 from the earlier class of 200X, providing a marginal relief to the domestic industry, which is faced with the twin problems of falling demand and decreasing prices. Iron ore is a key raw material for steel manufacture and according to rough estimate 1.6 tonne of iron ore is required to make 1 tonne of steel.
?Iron ore meant for domestic consumption for manufacture of iron and steel and cement will be charged at Class 180,? the railway ministry has notified. The move will translate into a relief of Rs 200 to Rs 350 per tonne for transporting the metal by railways. However, the freight for iron ore meant for exports has been left untouched at Class 200X.
?With prices of iron ore witnessing a significant decline over the past few months, we felt that the railway freight also needs to be reworked,? a railway ministry official said.
Global iron ore prices have fallen by as much as 40% to $50 per tonne early this month from $85 per tonne in February this year.
The domestic industry, however, is not satisfied with freight cut and is of the view that given the steep fall in global prices of the metal, the railways should further reduce freight not only for iron ore for domestic consumption but also for exports.
?Steel prices have been continuously declining while the rupee has now begun appreciating. The freight cut by railways will provide only a marginal relief. We will be approaching the railway ministry to reduce the freight classification for iron ore for domestic use as well as exports to Class 160,? said RK Sharma, secretary general of the Federation of Indian Mineral Industries.
The move will also prove beneficial for railways which has also registered a drop in its freight transport business on account of the economic slowdown.
In April this year, the railways registered a mere 3.05% increase in its freight carriage at 69.85 million tonne (mt) of which iron ore transport accounted of 12.44 mt.