A day after the Manmohan Singh government unveiled its economic stimulus package, Lalu Prasad?s Railway ministry stumped observers by increasing freight rates for cement, coke and coal by 7%?industry lamented that the freight hike would nullify the 4% cut in the Cenvat rate in the stimulus package.

When asked about the hike last Wednesday, rail minister Lalu Prasad told FE , ?We will look into the matter. We will try to ensure that the end user is not affected.? Prasad admitted there has been a slowdown in the loading of cement and iron ore in recent months.

But the very next day, top railway officials explicitly dismissed the prospect of any rollback in the hike which is expected to ring in an extra Rs 600 crore for the Railways. Higher input costs, higher credit costs and the higher-than-expected liabilities on account of the Sixth Pay Commission were the key reasons cited for the freight rate hike.

While the Railways is out of sync with the rest of the government, it highlights the quirky nature of freight rates during Lalu?s tenure at Rail Bhawan. Though rates have never been hiked in the minister?s four budgets till date, his ministry has issued circulars to tweak freight rate rules for surcharges and rebates for different commodities as many as 376 times since May 2004.

In 2008 so far, 45 changes have been made on freight rates and rules across commodities, more than half of which were with regard to iron ore, cement and steel. Iron ore freight rates have been changed as many as 19 times this year.

?The increase in the freight rates of cement, coal, and coke does not make any sense whichever way you look at it ? in the context of the economic slowdown and the initiatives taken by the government or the fact that wagon loads have declined considerably in the last two months,? said Akhileswar Sahay, president of the infrastructure advisory division at Feedback Ventures.

Industry chamber Assocham expressed surprise at the freight rate hike and said that with this increased levy, the bulk consumers would be worst affected. Secretary general D S Rawat said that the increase in freight rates would serious implications and will outdo the fiscal measures being taken by RBI and government to extend relief to Indian Inc., besides further pushing up inflation which has gradually moderated.