In yet another non-tariff measure to increase its earnings, Indian Railways has raised two surcharges that would have a combined impact of 6% on overall freight. The move, effective October 15, can unleash a spiral effect on the prices of goods in the economy already reeling under a prolonged spell of inflation.

However, the financially-constrained railways expects an extra income of R1,600 crore this year from the new surcharges, helping it to reach closer to its revenue target of R1,06,239 crore in 2011-12. In the first six months of the year, it has earned R48,947 crore, 10.4% higher than the same period last year.

Railways has increased development surcharge by 3% to 5% and the busy season surcharge by 3% to 10%, effective mid-October. Development surcharge is levied to collect money for construction and maintenance of facilities like freight terminals, while the latter is imposed from October to June.

“The hike in surcharges was a necessity as we could not pass on the burden of the recent increases in diesel and electricity costs through a direct raise in freight,” a senior official in railway ministry told FE, asking for anonymity.

Railways spokesperson Anil Saxena said the move would not impact prices of foodgrains. “Railways transports foodgrains for Food Corporation of India that is meant for public distribution at pre-determined prices. So, the hike would be absorbed by the government itself through an increase in food subsidy,” he said.

This is not the first time that the transporter has taken recourse to a non-tariff measure to perk up earnings this year. It imposed a busy season surcharge of 5% on coal and 7% on all other commodities in March this year. It also levied a congestion surcharge of 20% on traffic to Bangladesh and Pakistan.

The finance ministry, Planning Commission and railway insiders are pitching for an across-the-board hike in tariff, but lack

of political will in the railway ministry is holding up efforts.

In the absence of any increase in tariff, finance ministry is rejecting demands for a dividend cut and soft loans to railways. Recently, finance ministry refused to give a bridge loan of R2,000 crore to railways, asking it to go for raising fares instead.