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Railway freight hike to fetch Rs 4,000 cr

New Delhi, Feb 26, 2013, DHNS:

The Railways on Tuesday hiked freight charges by over 5 per cent to offset the increase in diesel price and adopted the fuel adjustment-linked revision in future tariffs, a move that can fetch it over Rs 4,000 crore, but fuel inflationary concerns in an economy facing slowdown in demand.

 The budget proposal means the freight rates will change each time diesel and power prices are revised, but the adjustment component will be dynamic in nature and will change twice a year in line with the revision in diesel prices.

 "In the light of deregulation of high speed diesel (HSD), Railways' finances need to be rationally insulated and to this end a mechanism to neutralise the impact of fuel prices on operating expenses is required to be put in place," Railway Minister Pawan Kumar Bansal said rationalising his budget proposal.


 Economists, industry and other stakeholders, however, said that the move will stoke inflation as the freight tariff hike will feed into the prices of other commodities and affect prices of foodgrains, fertiliser, iron and steel, ores, coal along with diesel, kerosene and cooking gas, which is transported through goods carriage trains.

 The hike has come at a time when the retail food inflation is quite close to double digit and an upward movement in transport cost of farm commodities will keep food prices at an elevated level.

 The increase in retail rates of diesel, LPG and kerosene that is needed because of the freight increase is yet to be calculated.

 Bansal said the increase in diesel prices last month had added Rs 3,330 crore to railway's fuel bill. Also, adding to its burden, is electricity tariffs that are revised periodically.

 Railways had last hiked the freight rate by about 20 per cent in March 6 last year.
Federation of Indian Export Organisation President Rafeeque Ahmed said that the hike freight will add to input cost of businesses at a time when there is a general slowdown.

 State Bank of India chief economist Brinda Jagirdar too agreed that the move will stoke inflation but said India needed to look beyond inflation at a time when there was stress on fiscal deficit, such move will only enhance growth. She said that impact on inflation will be marginal. While the freight rate for grain and pulses were increased to Rs 1,403.6 per tonne, from the current Rs 1,326.80 per tonne for average distance. For high-speed diesel and oil, it has been raised to Rs 1,041.8 per tonne, from Rs 984.80 per tonne. Freight on kerosene and LPG increased to Rs 937.60 per tonne from Rs 886.30 per tonne.
For urea, a major fertiliser, the rate has been raised to Rs 920 per tonne from Rs 869.60 per tonne.

Highest ever plan outlay

The Railways on Tuesday presented the highest ever plan outlay of over Rs 63,000 crore, over 45 per cent of which will be financed by the gross budgetary support, while a bulk will be drawn from the market through borrowing and public private partnerships.  The enhanced outlay will help expand and modernise the facilities of the world’s third-largest network that is targeting an investment of Rs 14 lakh crore by 2020 for this purpose.

Presenting his maiden railway budget, minister Pawan Kumar Bansal proposed an outlay of Rs 63,363 crore for 2013-14. This will be financed through a Gross Budgetary Support of Rs 26,000 crore and internal resources of Rs 14,260 crore.
Market borrowing of Rs 15,103 crore will also be resorted to in the coming financial year. This is a notch higher than the market borrowing of Rs 15,000 last year; Rs 6,000 crore will come through PPP mode to finance operations of railways this year, while Road Safety Fund of Rs 2,000 crore will also be roped in.

Due to the financial discipline Railways has been able to fully repay its loan of Rs 3,000 crore and its operating ratio during the 2013-14 is expected to increase to 87.8 per cent as compared to 88.8 per cent in 2011-12.

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