Rail Budget: CCI welcomes freight hike despite inflationary concerns

New Delhi: The Railways will increase freight charges by 5% on an average because of fuel price increase from April 1. Surprisingly, the Industry seems to have either shrugged off this increase or already accounted for it since business chambers did not emphasise this hike today. But prices are bound to rise because the freight increase will affect daily commodities such as pulses and grains.

As per agency reports, the basic freight charges of grains, pulses and groundnut oil will go up by nearly six per cent.

Freight rates of urea have been increased by 5.8 percent, which could have an impact on the government’s fertilizer subsidy bill. Freight rates of grain and pulses have been increased to Rs. 1,403.6 per tonne from the current Rs. 1,326.8 per tonne at an average lead of 1,307 km.

Similarly, freight rates of groundnut oil will go up to Rs 1,848 per tonne from the present Rs. 1,746.60 per tonne at an average lead of 1650 km. In case of urea, the freight charges increased to Rs 920 per tonne from the current Rs 869.60 per tonnes at an average lead of 886 km.

The rates exclude development charge and busy season charges which essentially means that actual hike would be higher. Freight rates have been increased due to deregulation of diesel prices which means Railways now have to pay an additional Rs 10 per litre for diesel. The proposal is to introduce a Fuel Adjustment Component (FAC) in freight rates which will be dynamic in nature and freight charges will be revised twice a year based on changes in input fuel cost.

CII’s Director General Chandrajit Banerjee actually welcomed the freight rate increase, saying “With fuel prices getting deregulated, linking of freight rates to increase in diesel prices is the correct direction to take and CII commends the Government for taking this step.”

S P Singh, Senior Fellow at the Indian Foundation of Transport Research and Training pointed out that prices of cement, urea etc have recently been increased since industry was expecting such a freight hike. He also made an interesting observation about the receding relevance of rail freight vis-a-vis road freight. “The number of large haulage trucks and tractor trailers has increased manifold in the last few years and the share of road freight has increased further”.

This, despite road freight being up to 40% more expensive than rail freight many times, Singh said. In 2002, rail freight account for about a third or 32% of all freight movement in the country but this declined to just a fifth or 20% by 2012. According to Singh, road freight movement accounts for a whopping 80% now.

Ficci’s Secretary General A Didar Singh welcomed several initiatives taken in this year’s Rail Budget but the freight rate increase did not find a mention in his reactions.