The Hindu Business Line : Lalu bets on volumes to drive growth

There is a proposal for volume discount scheme for attracting traffic without any suggestion if the scales of additional volumes eligible for discount will be calibrated.

Kolkata , Feb. 24

The irrepressible Lalu Prasad, as he presents the Rail Budget for third year in succession, bows down to the forces of market dynamics and pressures of populism.

By deciding to keep the freight level unchanged at the present level — if at all, he proposes to bring down the freight on petrol and diesel — he proves true to his words that the accent should be on volume growth. Several of the Budget proposals are targeted to achieve it.

Thus, the plan to introduce 25-tonne axle load wagons on two routes, Banspani-Daitari and Dali-Rajhara-Bhilai, both iron ore transporting routes served by the South Eastern Railway, will straightaway increase the capacity of wagons by around 10 per cent.

Other proposals such as non-peak season incremental freight discount scheme with discount up to 30 per cent in non-peak season and 20 per cent in peak season, loyalty discount scheme to encourage transportation of cement, iron and steel by rail and mini rake and two-point rake scheme along with a new freight forwarder scheme, all aim at boosting the volume.

As long as the economy is buoyant, the Minister will have little to worry. The targeted increase in freight traffic will materialise.

But the Budget does not clearly spell out several things. It does not indicate that the 8.68 per cent growth in originating freight traffic at the projected level of 726 million tonnes in 2006-07 is less than nearly 11 per cent growth at 668 mt being achieved in 2005-06.

Also, the earnings per million tonne km are up marginally. The Railways, in fact, proposes to score in long lead traffic, the estimated lead for 2006-07 being 660 km compared to 590 km in 2005-06.

The Budget does not say many things about the proposed rationalisation of tariff except the proposal to reduce the number of commodity groups from 40 to 28.

Such reduction will mean there will be fewer low-rated traffic as several of the freight items currently under lower classification are likely to be clubbed with higher classification items, thereby in effect pushing up the railway freight.

Volume discount scheme

The Minister declares that the average turnaround time of wagon has dropped but does not explain how it has been achieved and by how much and what it is likely to be in the next year.

There is a proposal for volume discount scheme for attracting traffic but without any suggestion if the scales of additional volumes eligible for discount will be calibrated.

During the course of the current financial year, the Minister chose to boost the earnings by making administrative announcements outside the Budget to change the classification of certain bulk commodities. Also, the demurrage rates were revised upwards thrice.

In the Budget for 2006-07, he refers to terminal management without elaborating if there will be private public partnership in this matter.

Since heavier wagons are going to be introduced, it is imperative that the industry also upgrades their infrastructure and the Railways, in its own interest, considers sharing the cost of such upgradation.

New passenger trains

True to his ilk, the Minister announces 55 new passenger trains and extends another 30 or so, without a thought to whether the introduction of so many new trains would not run counter to his plans to operate fast-moving freight trains.

Finally, the eastern freight corridor. The decision to terminate the proposed corridor at Sonnagar is unfortunate, even if for nothing else, on operational reasons.

There is no way more trains could be run on Ghat section of the Eastern Railway, i.e. between Gomo and Gaya section of the Grand Chord route, without addition to the line capacity.

Unless the freight corridor is extended from Sonnagar to Howrah and further to Haldia, the Eastern Railway will find it extremely difficult to handle the volume of traffic projected to materialise on the route in the coming years.

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