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Santanu Sanyal

On August 28, the Rail Board issued a circular outlining the guidelines for private sidings for loading iron ore. The circular is important because it addresses a critical issue, namely, how to rationalise the loading and transportation of ore by rail, keeping in view the projected growth of the country’s steel industry. In fact, these guidelines, together with the earlier decision on 200X classification for other than domestic consumption, are certainly major steps towards ensuring availability of the ore to domestic consumers.

The essence of the new guidelines is simple: while granting permission to construction of sidings for loading iron ore, highest priority will be accorded to actual producers of iron and steel. Again, among the actual producers, the integrated steel plants having assured supply arrangements by way of either captive mines or long-term arrangements with agencies authorised to mine iron ore, will get priority.

Among the integrated steel plants, top most priority will be given to those with annual production capacity of 10 million tonnes and above, followed by those with capacity ranging between 5 mt to less than 10 mt, from 4 mt to less than 5 mt, and so on. Even the demand for those with half a million tonne capacity annually each will be considered.

Next in priority will be the producers of steel, pig iron and sponge iron classified under Priority C of Preferential Traffic Order as per the policy on programming iron ore traffic, to be followed by miners and stevedores and traders (in that order).

The other feature of the circular is that preference will be given to those planning sidings on private lands and the zonal railways have been told in no uncertain terms that permission for sidings on railway lands should be considered “only after exhausting all proposals for sidings on private land” and in this respect also integrated steel plants will be considered first.

The Railways also proposes to charge a registration fee (non-refundable) along with application for construction of each new siding and the rates will be Rs 10 crore for a siding on railways land and Rs 5 crore on private land. In case the Railways fails to grant permission, 99 per cent of the fee will be refunded.

Several factors are believed to have weighed heavily on the Railways for formulating these guidelines. The earlier system of granting permission for constructing sidings for loading iron ore led to some unfair practices. As Mr V.N. Mathur, Member (Traffic), Railway Board, told Business Line, “ the earlier system led a large number of traders and others who were neither producers nor mine-owners seeking sidings and this created a situation where genuine producers of iron and steel were going to suffer and we therefore stopped granting permission for sidings about a year ago. The ‘first come first serve’ scheme has been discontinued”.

Mr Mathur couldn’t be more right. Take, for example, South Eastern Railway, the leading zonal railway engaged in transportation of iron ore. Only around 10 per cent of the approvals earlier granted on ‘first come first serve’ basis has actually become operational and most of those seeking approvals or running the sidings are not actual producers of iron and steel.

The Railways apprehended a worse situation. Under the Wagon Investment Scheme (WIS), the Railways is committed to offer rakes to the WIS customers, mostly traders.

If some of these WIS customers, by virtue of the earlier policy, succeeded in securing sidings on railway land, it would mean that they, without being producers of iron and steel, would exert virtually monopoly control over the supply of the vital raw material for the steel industry. This certainly could not be in the best interest of the economy in general and steel industry in particular. The Railways’ concern, therefore, is understandable.

There is another point. The earlier policy could land the Railways in a piquant situation in view of the projected growth of the steel sector.

Major integrated steel producers such as Arcelor Mittal or Posco and others are planning to come to India and according to Steel Ministry estimates, the country’s steel production will rise to 124 mt by 2011-12 compared to the earlier estimate of 110 mt by 2019-20.

As a result, the demand for sidings in the Keonjhar-Sundargarh-West Singbhum areas, the country’s largest iron ore area spread over the States of Orissa and Jharkhand and served by SER, will rise. Right now, SER loads about 55 iron ore rakes a day, likely to more than double in the next few years with the growth of the steel sector. This will naturally put pressure on the railway network.

The Railways have the land to lay new lines and create additional capacity and thus to meet the projected increase in demand for additional services. Transferring the land to private firms not engaged in steel production will be like mortgaging family property.

The proposal to charge for registration along with application for siding is clearly to discourage fly-by-night operators. But it is also felt that the registration fee of Rs 5 crore for setting up a siding on private land is rather on the high side.

After all, the involvement of the Railways in such a project is minimum. Will the Railways consider refunding part of the fee once it is convinced of the seriousness of purpose of those setting up sidings on private land?

More Stories on : Railways | Minerals | Steel | On the move

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