Rail Budget 2016: Freight rates may see downward revision

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Published: February 26, 2016 12:24:47 AM

Rail Budget 2016: Even as freight earnings are set to fall short by over Rs 10,000 crore to stand at Rs 1,11,853 crore in the current financial year, railway minister Suresh Prabhu hinted at a possible downward revision of the rates in the days to come to regain the lost ground in the freight market by boosting volumes.

Rail Budget 2016: Even as freight earnings are set to fall short by over Rs 10,000 crore to stand at Rs 1,11,853 crore in the current financial year, railway minister Suresh Prabhu hinted at a possible downward revision of the rates in the days to come to regain the lost ground in the freight market by boosting volumes.

The railway minister’s strategy includes expanding the freight basket, facilitate faster transportation, create necessary infrastructure and rationalise tariff. The freight revenue target for 2016-17 has been fixed at Rs 1,17,933 crore, down from the budgetary estimates of Rs 1,21,423 crore for the current fiscal.

Indian Railways typically has focused on increasing revenues through tariff hikes. We want to change that and challenge our conventional thinking on freight policies to win back our share in the transportation sector,” Prabhu said in his speech. He added that the current tariff structure of Indian Railways has led to outpricing of services in the freight market. A review of tariff policy will be undertaken to evolve a competitive rate structure vis a vis other modes, permit multi-point loading/unloading and apply differentiated tariffs to increase utilisation of alternate routes, Prabhu said in his speech.

With the current demand crunch afflicting the economy, Prabhu did not foresee much growth in traffic for the next fiscal, having projected loading target at 1,157 MT for FY17 compared to the projected 1,107 MT for the current fiscal.

Prabhu expects revenue from all principal commodities to grow though marginally. Handling coal will fetch Rs 53,685-crore revenue compared to the projected Rs 52,055 crore in the current fiscal. Similarly, revenue from iron ore transportation, he expects, to go up to Rs 6,967 crore from Rs 6,593 crore a year earlier. Cement would fetch another Rs 500 crore to the current financial year’s estimate of Rs 9,400 crore.

Instead of depending hugely upon 10 bulk commodities including coal, iron ore and others that account for 88% of the freight basket, the railway minister wants to look beyond and tap the untapped freight sources like automobiles. He also announced three freight corridors.

Plans are afoot to set up rail-side logistics parks and warehousing to facilitate transportation though the PPP mode and to provide last mile connectivity for freight business. Prabhu also said country’s first rail auto hub will be inauguaretd soon in Chennai to attract automobile traffic. Key customer managers will also be appointed to liaison with the major freight stakeholders.

Industry is happy. Hindalco managing director D Bhattacharya said,”The railway budget is customer-centric, both for the passengers and the industry. It is seeking to enhance the competitiveness of railways for goods traffic through announcements of review of the freight tariff structure, direct long term freight negotiations with key partners, container trains with time-table and focus on improving connectivity to ports and speed of freight movement — a win-win for the industry and the railways.” Ficci president Harshavardhan Neotia said initiatives towards developing an integrated railway network, greater emphasis on dedicated freight corridors and improving port connectivity as well as north-east connectivity would go a long way in expanding the freight business. Assocham president Sunil Kanoria said though there have been slippages in the revenue target in the current fiscal, it has got more to do with the overall economic slowdown, more so in sectors like coal, steel, iron ore etc which have been worst hit but have been the major revenue sources for the Railways.

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