The Hindu Business Line : Domestic consumers of iron ore to benefit as Rlys adjusts freight charges

Kolkata, June 6 Indian Railways has again brought about an adjustment in the classification of iron ore, third such exercise since the Railway Minister placed Rail Budget for 2008-09.

As a result, genuine domestic consumers of iron ore such as producers of pig iron, sponge iron and steel will benefit while the traders, catering to either domestic or export market, will be hit.

The integrated steel plants as well as secondary steel producers, all genuine consumers of ore, will henceforth not only pay a lower freight as per 170 classification as against 180 so far but will also have an assured supply of the ore; while iron ore transportation for other than genuine domestic consumption may become somewhat uncertain as it will attract a much higher rail freight at 200X classification.

So far 200 was the highest classification for the purpose of fixing freight in the Railways; 200X thus becomes the latest, also the highest, addition to the classification list.

Congestion charge goes

With the introduction of 200X classification, the Railways has abolished congestion charges so far levied on iron ore traffic booked to sidings and good sheds serving ports and accordingly the zonal railways have been asked not to notify the list of terminals as serving ports. However, the congestion surcharge at 20 per cent on iron ore traffic booked to Pakistan and Bangladesh will continue till March 31, 2009.

In order to avail themselves of the concessional rail tariff, the integrated steel plants and secondary steel producers having their own private sidings for handling inward rakes will be required to submit to the respective zonal railway certified copies of Industrial Entrepreneur Memorandum, the Factory Licence, Certification of Registration under Contract Labour Act, Consent for Establishment, Consent for Operation from the Pollution Control Board, Central Excise registration certificate and monthly excise return.

Higher freight

The iron ore exporters will now be required to cough up a much higher railway freight.

According to one estimate, the rail transportation cost of transporting iron ore from Barajamda to Haldia dock will increase to Rs 1,256 from the present Rs 981 a tonne, from Barbil to Paradip port to Rs 2,015 from Rs 1,568/tonne and from Dongaposi to Visakhapatnam port from Rs 2,397 to Rs 3,086/tonne.

Barajamda, Barbil and Dongaposi are located in iron ore-rich belts of Orissa and Jharkhand.

Equally, if not more, affected will be a section of domestic ore traders, particularly those who have assured allotment of six rakes a month under the Wagon Investment Scheme. Riding high on the assured rake allotment, these traders entered into ore supply arrangements with many secondary steel producers having little access to ore mines and thus charged fancy premium on the supplies made. For these traders, the rail freight now will become prohibitive.

There has been a large-scale cancellation of indents for rakes.

The number of cancellations in Chakradharpur Division of South Eastern Railway alone is about 900, it is learnt.

The secondary steel producers, accounting for an estimated 40 per cent of the country’s production and so far complaining of the shortage of ore due to non-availability of rakes, are jubilant over the present decision of the Railways as it will guarantee availability of ore to them at a lower price than before.

“The touts posing as traders have already started disappearing,” says a spokesman for the sponge iron manufacturing industry. The income of the Railways too will increase. Most important, it should help curb inflation, it is felt.

However, there is one concern. It is not enough that the ore is booked for transportation at a concessional rate to genuine producers of sponge iron, pig iron and steel; it is equally important to ensure that consignments so booked also reach the destinations as declared at the time of booking. The Railways has to ensure it; otherwise, the purpose of the scheme will be defeated, it is feared.