Logistics

Rlys’ 10-year discount to woo short distance freight

Mamuni Das New Delhi | Updated on August 12, 2020

Railways data for July show that there continues to be a drop in demand for loading several core-commodities

Indian Railways has allowed its zones to provide freight discounts for those customers who promise to bring on extra traffic for 100 km for up to 10 years, increasing the time-period for the scheme ten-fold. This will help it capture more cargo from the road sector.

This strategy appears promising at a time when the national transporter is trying to shore up its traffic. The “other commodities” — which are a smaller bunch of cargo that were unable to get capacity on the Railways’ tracks – have shown a 20 per cent growth in loading in July.

After the Covid-19 prompted national lockdown from March-end, when the road sector was facing massive disruption, Indian Railways had delegated the power to Zones to enter into agreement for shorter distance traffic to book cargo for one-year. It had permitted the zones to incentivise freight customers provided they brought in additional volumes and revenues to the railways. The scheme — permitting 50 per cent freight discount for cargo moving distances of up to 50 km, 25 per cent for distances of up to 75 km — was originally notified on June 30, for implementation from July 1, 2020. It requires customers to give a bank guarantee and has now been extended, according to a railway note of August 5.

Railway sector experts hope such schemes will mark the beginning of lower train freight rates across all segments, which were traditionally high and subsidised the passenger services.

However, the Railway Ministry policy has barred certain types of commodities and customers including coal and coke, iron ore and containers; apart from traffic for railways and military, from getting benefits from such a long-term scheme. The notification says that benefits have to be provided after a cost-benefit analysis of the extra revenue that such long-term agreements bring. Railways data for July show that there continues to be a drop in demand for loading several core-commodities. In July, the fourth month after the national lockdown, commodities categories that were loaded more were foodgrains, fertiliser, iron ore for exports and pig-iron and finished steel. Commodities that continued to be in the negative zone against the same time last year were coal, petroleum products, raw material like coal and iron ore for steel plants, cement (excluding clinker) among others.

Indian Railways chugged closer to loading the same amount of cargo in July as against April. The national transporter moved 95.18 million tonne of cargo in July this year, reflecting a 4.57 per cent drop in growth over the same time last year. This reflects a further closing of the gap in negative growth against previous month June, when cargo loading shrunk by 7.73 per cent year-on-year.

Published on August 12, 2020

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