The Hindu Business Line : New norms in Rail Budget — Tata Steel may step up despatches by road

TATA Steel may be forced to step up despatches of finished steel items by road in view of the steep increase in demurrage rates, drastic reduction in free time of wagons and changes in certain other rules, as announced in the Rail Budget for 2005-06.

Right now the company sends by rail an estimated 2.1 million tonnes (mt) of finished products, out of a total despatch of four mt. These 2.1 mt represents roughly 70 per cent of the total volume of finished products amenable to despatches by rail (not all products are ideally suited for despatches by rail because of various factors such as distance to be covered and the types of products). Unless the Railways modifies the rules as announced in the Budget for 2005-06 and make them more user friendly, the private sector steel giant, it is learnt, might be constrained to bring down the 70 per cent figure to around 50 per cent.

In other words, despatches of finished products by road might jump by an estimated six-lakh tonnes or so, of course subject to finalisation of arrangements for additional road movement.

The exact impact of the Rail Budget proposals on the company, though still being worked out, will be substantial, it is felt. Not merely because the demurrage rates have been revised upwards and the free period has been reduced but also because of changes in certain other rules. For example, the credit earlier granted for efficient performance in respect of certain types of wagons was adjusted against not-so-satisfactory performance in respect of certain other types of wagons.

Such an adjustment will no longer be permitted. According to one estimate, the Budget proposals might slap an additional burden of more than Rs 10 crore on the company.

At present, Tata Steel pays little by way of demurrage. The detention of wagons bringing in raw materials too is not substantial. For example, it case of iron ore wagons, the detention is negligible and the Budget too has not made any significant change in free time in respect of iron ore wagons. However, for coal wagons, the free time will be brought down to 12 hours from the present 21 hours. The company is not unduly worried over such a reduction because its growth plan, proposed to be implemented over next three years, too has set a target of 12 hours for the release of coal wagons.

What causes concern is the drastic reduction in free time in respect of wagons for finished products from the present 60 hours to around 30 hours. Also, the withdrawal of the credit system currently granted for efficient performance.

The Tata Steel management, therefore, has asked the Railways for a review of the relevant proposals in the Rail Budget, it is learnt.

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