Railways freight productivity declines in first half

For the first time since 2010, freight productivity of the Indian Railways — both in distance and volume terms — declined in the first half of the current fiscal, data accessed by BusinessLine show. Industry players, however, say this could be the first decline in decades.

The decline in the first six months of this fiscal has raised serious concern as freight transportation is a key bread-earner for the Indian Railways, accounting for almost 70 per cent of its total income.

Overall, however, the Railway earnings reflect a growth on account of the hike in freight tariff during this period. The net tonne kilometre (NTKM) drop, which is despite a 1.61 per cent growth in loading, is primarily because of a 2.56 per cent drop in lead or the average distance travelled.

“This is a rare phenomenon. On an annual basis, the NTKM has dropped in 2012-13 — when the average lead dropped to 645 km from 690 km the previous year. It was in 1988-89, when the NTKM was almost flat, reflecting a marginal drop in absolute numbers. 1978-79 was another such year,” said Vivek Sahai, former Railway Board Chairman, who has now joined the Observer Research Foundation.

The commodities that saw a positive NTKM include coal (0.68 per cent), pig iron and finished steel (7.31 per cent), fertilisers (32.29 per cent) and mineral oil including petroleum products (2.38 per cent).

When asked by reporters, Railway Minister Suresh Prabhu said freight traffic reflects the economy’s core sector performance, adding that the October performance was good.

On whether a reduction in freight charges could attract more freight traffic, Prabhu said he would inform reporters at the right time.

He also wondered whether any drop in tariffs would help, as there was capacity crunch in the Railways.

Experts say that one reason for such a dip could be because of the cargo shifting to the road sector with the drop in diesel prices in the past two years.

The Railways, on the other side, has increased freight tariffs.

The decline in freight handling could also be because of slowdown in economy, as the Railways haul coal, steel, cement, fertiliser, foodgrain containers and other commodities. Yet another reason could be a long-term one, as there has been a general trend of average lead going down with production centres and consumption centres being set up in close proximity. To check this, the Railways has been reducing the telescopic fare advantage or the progressive rate at which tariffs come down if a commodity is moved to a longer distance.

The Railways has been focusing on increasing cargo loading to such an extent that the NTKM does not drop.

On an annual basis, there have been three instances when there was a drop in NTKM ( see table ).

“Traffic has started picking up in October. But, the cumulative impact is still not clear,” said a Railway Ministry official.