Moving goods across the country by containers will now be more expensive, given the 12 per cent service tax. Container Corporation of India will feel the immediate impact. It is, however, likely to pass on the hikes to the end users. As railway freight charges, which will not attract the service tax, usually account for a substantial portion of the tariff, the impact is likely to be moderate. We do not expect this move to act as a detriment on the pace of containerisation. There may be a near-term impact on profitability, as Container Corp may be able to pass on the hikes only in a phased manner. There is, however, no long-term concern on its fundamentals due to this move.
(This article was published in the Business Line print edition dated March 1, 2006)