Good news on economy: Indian Railways freight offloading shows ‘healthy growth’ after 2-year gap

By: |
Updated: February 27, 2017 5:34:00 AM

Indian Railways’ freight loading has seen a dramatic increase since late January, recovering from a trough of almost consistent negative year-on-year growth.

Indian Railways, freight loading, demonetisation, railway official, Railways Growth Rate, Suresh Prabhu, Indian Government, BJP, Narendra ModiIndian Railways’ freight loading has seen a dramatic increase since late January, recovering from a trough of almost consistent negative year-on-year growth. (Source: Reuters)

In what indicates a possible pick-up in the economy, Indian Railways’ freight loading has seen a dramatic increase since late January, recovering from a trough of almost consistent negative year-on-year growth since late 2014-15. The robust data from the railways come on the heels of a 0.4% drop in industrial production and 8.7% contraction in cement output in December, reflecting the impact of demonetisation.

Average loading per day jumped to 3.27 million tonne (mt), an all-time high, during the 10-day period January 21-30, and was soon superseded — between February 11 and 20, daily loading hit 3.32 mt. In the first nine months of the fiscal year, the loading was just 2.7 mt per day. Freight loading between April and January was down 0.7% year on year while the revenue dropped 6%.

According to a railway official, an average loading of around 3.25 mt/day is considered “healthy”. “The revenue is definitely looking up. In January, the railways carried around 94-mt load. February is looking very good… in the last four days (February 19-22), the loading has been 3.43 mt, 3.48 mt, 3.26 mt and 3.24 mt,” said the official. In fact, the trend of subdued freight receipts began in late 2014-15, resulting in IR missing its annual revenue targets. Freight revenue declined from R1,0,5791 crore in 2014-15 to R97,386 crore in 2015-16 and a flat growth is estimated (RE) for 2016-17.

You might also want to see this:

The previous best 10-day average loading was 3.18 mt/day during November 21-30 period last year. “We are witnessing a spurt in growth. November also was a very good period when loading spiked with 10-day average touching 3.18 mt between 21st of 30th of the month. This was the best 10-day average last year. The momentum has picked up of late,” added the official. This may be compared to a dismal post-demonetisation December 1-5 average of around 2.7 mt. One could draw the conclusion that the railways’ freight loading was about to look up from early November while the turnaround was briefly suspended with the note swap hitting transactions.

IR’s freight loading target for 2017-18 has been kept at 1,165 mt, an increase of mere a 71.5 mt from the revised estimate for 2016-17. The earnings from goods, which contributes around 60% of the transporter’s total traffic receipts, have been estimated to be Rs1.18 lakh crore for 2017-18 compared with an estimated Rs1.17 lakh crore in 2016-17. The financial health of the national carrier has been under pressure as the operating ratio, money spent to earn Rs100, is actually above 100, as reported by FE recently.

The carrier expects a further rise in traffic starting March as it targets to start signing the long-pending long-term agreements. The railways will sign three-year contracts to provide certainty of rates. It is also also going to give discount to people even if the business is retained. So, say, if a customer does 5 mt business this year and repeats the next year year too, there will be certain discounts.

“The railways is conscious of the fact that it is losing business and hence even business retention needs to be incentivised. We are also looking to incentivise growth by giving discounts on incremental traffic which will go up to 35%,” added the official. Cement and stainless steel makers are prominent customers the railways is looking at.

The loading traffic has grown post rationalisation of iron ore rates which were earlier different for domestic use and exports. “It was a tough decision (rationalising iron ore freight rates) to take but we went ahead. Coal freight was also rationalised because we wanted to favour long-leads to reduce the rates,” said the official.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition