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The Railway Budget has increased freight rates for many commodities. Kerosene, LPG as well as iron & steel will see an increase of 0.8 per cent while urea, pulses and grains will see a steep 10 per cent rate hike.
Coal freight rates have been hiked on average by 6.3 per cent per tonne per km. For instance, coal is hauled over an average distance of 535 km and the rate per tonne per km will increase from Rs 1.35 to Rs 1.44, starting April 1, 2015.
While the railway is the primary means of transporting coal, the rate hike will not impact Coal India. This is because buyers pay the transport charges along with loading charges.
However, the increase in freight rates would have an impact on end users of coal such as the aluminium segment. Also, higher cement freight rates could have an impact on the realty sector. Cement prices are on an uptrend due to demand pick-up in the construction segment. It is likely that cement producers will pass on the rates to end-users.
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