No changes likely in freight

RUN-UP TO RAILWAY BUDGET 2005/ Tariff structure may be rationalised by reducing classes

Railway Minister Lalu Prasad may resort to freight rationalisation in the Budget to to improve revenues instead of increasing the rates. Even though Prasad is in favour of increasing the rates, the Planning Commission has been opposing any such move.

The railways plan to reduce the number of tariff classes by about 60 per cent to a maximum of 10 rate schedules. At present, there are about 27 tariff classes.

A direct fallout of the restructuring drive will be that carrying of some commodities by rail may become more expensive, while others may become cheaper.

It is, however, expected that the restructuring will be done in a way that enables the Railways to garner additional resources.

"There will be around 8-10 schedules depending on the type of product being carried," a ministry official said. The official said the move would make freight services more customer-friendly. The large number of tariff classifications create confusion for customers.

For instance, he said different rates were charged for aluminium rods and slabs. Rationalising the rates will see similar products brought under the same category.

The products will be classified as raw materials, foodgrains, finished products and so on. There will be an omnibus class that will contain products not covered by other classes.

While Prasad is not expected to address the issue of cross subsidisation of high freight rates by passenger fares, he may try to correct imbalances within the freight segment. Even within the freight segment, some products are subsidised while other are overcharged.

One of the steps planned in this direction has been a reduction in rates on oil cargo, which attracts the highest tariffs. This is expected to help the railways gain the market share that it has lost out to pipelines.

Freight rationalisation has been a trend with the government in last few years to ease the complex tariff structures. The number of classes have been reduced steadily over the years.

In 2002-03, the then Railway Minister, Nitish Kumar, reduced the number of classes from 59 to 32, while in February 2004-05, the number was further brought down to 27.