Food, electricity prices set to rise after freight hike

Prices of foodgrain and electricity are among a host of other commodities that are set to rise as the Railway Budget proposed up to 10 per cent increase in freight rates on Thursday.

While the freight rates on urea and food grains were hiked by 10 per cent, that of coal rose to 6.3 per cent. Freight on steel was up 2.7 per cent. Urea prices will, however, not go up for farmers, Fertiliser Minister Ananth Kumar clarified but the subsidy outgo will increase due to freight hike.

According to state-owned power producer NTPC, the cost of production of electricity would rise about 4-5 paise per unit.

The Railway Budget proposals, presented by Railway Minister Suresh Prabhu in Parliament on Thursday, proposed to hike freight rates for 12 commodities in the range of 0.8 per cent to 10 per cent.

Prices of cement and steel, the two main commodities used in housing, rail and road building, may directly affect Prime Minister Narendra Modi’s flagship project of ‘Housing for All’ as the cost for houses would go up.

According to cement producers, the prices of cement bags may go up by Rs 10 per bag following the hike in freight rate on cement.

The increase in freight rate would garner 13.5 per cent additional revenue to the railways on this count. Last year, the railways had earned 14 per cent higher revenue due to increase in freight rates.

However, the railway minister did not term the freight increase in 12 commodities as a hike, saying it is part of the ongoing reclassification of commodities that will reduce freight rates in certain sectors and may increase in others.

The Budget sought to re-classify cargo categories and distance slabs to generate more revenue from the same freight rates.