The Hindu Business Line : Is Railway freight really south bound?

A few weeks ago, newspapers carried big advertisements with a beaming Railway Minister, Mr Lalu Prasad, proclaiming how the Railways responded to the diesel price hike by offering freight discounts. When the price of virtually everything is rising, the railway freight, it would appear from the Railway Minister's proclamation, is heading south.

Not exactly. What the advertisements did not say was how the Railways, through administrative orders issued outside the Budget, had been from time to time announcing measures, which amount to freight rise.

The steps include changes in classification, modification of taper of base class, dynamic pricing, increase in permissible carrying capacity of wagons. The list is long.

Classification change

First, the changes in classification. The classification of iron and manganese ore has been changed several times since October 2004.

Till October 28, 2004, the classification of these two minerals was 120. It was revised upwards to 130 on October 29, 2004, then to 140 in November 2004 and then again to 160 in May 2005. Now from July 1it has been further revised upwards to 170.

Once a commodity is put on a higher class, it starts attracting higher freight.

As a result of the change in the classification of iron ore since October 2004, the cost of transporting one tonne of iron ore from Kiriburu/Meghatuburu mines to the Bokaro Steel Plant, covering 370 km, has jumped from Rs 278.30 to nearly Rs 400, or by nearly 44 per cent.

Similarly, other raw materials for steel plants, such as limestone and dolomite, too have been put on a higher class. Till November 26, 2004, these two items were classed 120.

The next day, the classification was revised upward to 140, and again to 160 on December 1, 2005 and now from July 1further to 170.

The implication: The cost of carrying one tonne of limestone from Jaisalmer to the Durgapur Steel Plant, covering more than 1900 km, goes up by 47 per cent to Rs 1,833.5.

The rail freight for transporting one tonne of dolomite from Koteshwar mines in Khanabanjari to the Bokaro Steel Plant jumps by 45 per cent to more than Rs 900 from Rs 628.

Freight rates adjustment

Next, the adjustment of freight rates. In a June 21 circular the Railway Board announced the revision of taper of class rates of all commodities by modifying the taper of the base class 100.

The distance block for charge between 100 and 800 km will increase from the present five to 10 km.

The revised rates, which became effective from July 1, have been announced for distances up to 3,500 km. Beyond this, the rates will be worked out by multiplying the rate for 3,500 km with the actual distance in kilometres.

In simple words, it means that the per tonne cost of rail transportation of a commodity will go up. The per tonne cost increase will range from around 1.59 per cent to 4.7 per cent depending on the distance, no matter whether the commodity is classed 100 or 180.

The cost of transportation of imported coal from Haldia, Paradip and Visakhapatnam ports to different steel plants too will rise — the range of increase being from a low of 1.46 per cent to 2.45 per cent.

Steel Authority of India Ltd (SAIL) has calculated that the impact of the changes in the classification of iron ore, manganese ore, limestone and dolomite will push up the cost of railway freight by more than six per cent while the modification of taper of the base class by 1.5 to 3 per cent depending on the distances.

Cumulatively, the additional financial burden on SAIL for inward transportation of inputs (including coal) for the nine-month period ending in March 2007 is estimated at more than Rs 70 crore.

Dynamic pricing

On March 29the Railway Board issued a notification announcing dynamic pricing (freight business) under which busy season surcharge and busy route surcharge were levied for three months from April to June 2006.

On June 21,the Railway Board came out with a new notification stating that while busy season surcharge will not be in force any more, the busy route surcharge will continue till March 31, 2007.

Which means all traffic to Bangladesh and Pakistan will continue to attract surcharge at the rate of 20 per cent and all iron ore traffic booked to goods sheds and sidings serving various ports will continue to attract surcharge at the rate of 10 per cent. Ever since November 2004, the Railways has been systematically changing the permissible carrying capacity (CC) of wagons.

First, it was CC plus two, which subsequently became CC plus four and now it is CC plus four for coal and CC plus eight for iron ore. Also, these rules will be in force in respect of a large number of routes.

It is a common knowledge that under no circumstances can a BoX N wagon carry more than 60 tonnes of washed coking coal including imported coal. However, as per the Rail Board circular, the consignee has to pay for 65 tonnes irrespective of actual volume of loading.

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