The recent ban on iron ore exports and suspension of mineral despatch permits by the Karnataka government is likely to leave a Rs 2,000-crore hole in the revenues of Indian Railways this year.
The public sector behemoth has already fallen short by eight million tonnes in freight loading for the first quarter of the current financial year due to repeated disruptions in the Naxal-affected areas.
The transport sector (both railways and roadways) may end up losing Rs 5,500 crore in revenues, if the ban stays for a year in the state, according to estimates by the iron ore industry.
The ban on iron ore exports and suspension of mineral despatch permits came to effect from July 26 and July 28, respectively.
Karnataka accounts for around 50 per cent of the total iron ore exports handled by the railways annually. During 2009-10, the railways carried from the state 22 million tonnes (mt) of iron ore meant for exports, generating a revenue of Rs 2,300 crore and a net profit of Rs 1,300 crore.
The total iron ore exports handled by the railways during the year was 45 mt, generating a revenue of Rs 4,585 crore and a net profit of Rs 3,000 crore. Collectively, by carrying iron ore for exports and domestic use by steel mills, the railways earned Rs 8,425 crore from 132 mt during 2009-10, about 14 per cent of the total freight traffic.
The movement of rakes carrying iron ore from the state’s mines in Bellary-Hospet, Sandur, Chitradurga and Tumkur has come to a complete standstill. On an average, the railways carry 20 rakes of iron ore every day from Karnataka miners, netting a revenue of Rs 10 crore. However, with the ban coming into effect, the movement of rakes dipped to as low as three rakes in the first week of August, officials in the South Western Railway (SWR) zone, headquartered in Hubli, told Business Standard.
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In fact, before the ban orders were issued, the railways had seen a dip in their iron ore traffic during the first quarter this year due to hike in freight rates. The rates were increased by Rs 600 per tonne (ministry officials said freight rates for iron-ore were raised twice — once by Rs 100 a tonne and then again by Rs 300 a tonne) to an average of Rs 1,800-2,000 per tonne depending on the distance. The rates are now 30 per cent higher than road freight rates.
As a mark of protest against the increase in freight rates, the miners’ association in the Bellary-Hospet region had stopped loading any wagon between May 20 and June 30. In April, SWR carried 14 rakes of iron ore daily yielding a revenue of Rs 7 crore. The figure dipped to 11 rakes per day in May, contributing a revenue of Rs 5.5 crore.
Subsequently, the traffic further dipped to five and four rakes in June and July returning a revenue of Rs 2.5 crore and Rs 2 crore, respectively.
With the ban order coming into effect, the traffic dipped to just three rakes per day during the first week of August before coming to a complete halt in the second week. At the current pace of operations, the railways would have handled close to 16 mt during the current year in Karnataka.
During the April-June period, the railways carried 7.28 mt of iron ore for export, a decline of 3.21 mt over the targeted 10.49 mt for the period. Traffic in iron-ore for export on the railways’ network has fallen by as much as 17 per cent this year as compared to the 8.74 mt of the commodity transported during April-June 2009.