The Indian Steel Association (ISA) — which includes the country’s largest steel mills like AM/NS India, Tata Steel, JSW, JSPL and PSU-majors like SAIL and RINL — has sought intervention of the Steel Ministry and the Railways in order to waive off a “busy season surcharge” on rakes (which includes 40-60 wagons) and provide wagons at base rates.
The ISA, in a letter to the Railway Board, has raised concerns over the levy of busy season charge. The surcharge is levied at 15 per cent over the base rates of rakes on all commodities transported, except coal. Normally, this levy is for 9 months of the fiscal (April to June, and again October to March). The July to September months are seen as a lean season and in these three months rakes are provided at base rates (without the levy). The industry considers this as “lean season discount”.
However, this year, the Railways decided to levy a 15 per cent surcharge during July (doing away the lean season discount), which has not been taken well by the industry.
“For the past eight years, this provision (lean season discounting) has been supporting the industries to offset high logistics cost to some extent. Though, the industry has been representing to remove Levy of Busy Season Charge all together to reduce high logistics cost being borne on this account,” it said in a letter to Jaya Varma Sinha, member, Operation and Business Development, Railway Board.
The steel mills have argued that an absence of discount is also impacting dispatches and has put planning for July to September months in a disarray. Allocation of resources has also been hit.
“Industries estimated freight costs are projected to increase on an annual basis, directly affecting our industry’s competitiveness. This decision undermines the stability and predictability that the discount had provided, which in turn allowed industries to allocate resources more effectively and mitigate the large logistics costs incurred during the challenging monsoon period,” it claimed.
“However, the recent notification discontinuing the Lean Season Discount in July 2023, has significantly impacted Steel Industry’s planning for the second quarter dispatches, particularly during the monsoons,” the letter added.
A copy of the letter has also been marked to the Union Steel Secretary.
Seeking a review, the ISA called for reinstating the Lean Season Discount as early as possible.
“….to reinstate the lean season discount for the July month immediately, more-so remove the Busy Season Charge all together in the long run,” the letter said.
Incidentally, the Indian Railways had earlier this year halted fresh applications for inducting new wagons from the private sector for two years under the popular General Purpose Wagon Investment Scheme — that was rolled out in April 2018, following track congestion issues.
Applications received would continue to get incentives and will be inducted.
Sources said, around 100 such privately owned rakes (one rake has 40-60 wagons) have already been inducted onto the Indian Railways network. Another 500 rakes are under various stages of approval under the General Purpose Wagon Investment Scheme.
This scheme was introduced in order to push for private investment in wagons and reduce shortages. It offered various concessions, including discounts on freight tariffs and provided branding rights. The tariff came at discounts till the company recovered its capital cost.