Steel units resent move to hike freight costs

The possibility of a fresh hike in mineral freight rates in Odisha has rattled steel makers and end use industries. Any rise in transportation rates would make iron ore dearer for the steel units, who are already battling steep input costs and struggling to keep operations afloat.

The State Transport Authority (STA) has recommended increase of mineral freight rates for distance up to 50 km and beyond to compensate for idle return journey. It has suggested that the maximum freight rate for six-wheelers at Rs 7.3 per tonne/per km in contrast to Rs 4.56, the minimum prescribed rate. Proportionate hikes have also been recommended for 10-wheelers and 12-wheelers.

If the STA's recommendations are accepted in toto by the state government, it could imply an increase of 15-20 per cent in mineral transportation rates, leading to significant escalation in landed cost of the raw material.

Purushottam Kandoi, president of All Odisha Steel Federation (AOSF) said: "The earlier notification (on mineral transportation rates) was in consultation with the industries. But this time, the recommendations on fresh rates have been made without informing us. The steel sector is ruined and any increase (in freight costs) will affect it severely."

As per STA's recommendations, the maximum freight rate for six-wheeler carriage will go up by 16 per cent in the range of 21-50 km. For distance beyond 50 km, the maximum freight rate for six-wheeler carriage will be hiked by 14 per cent.

Likewise, the fixed component of freight for six-wheeler carriage in the range of 21-50 km would be raised from Rs 1,220 to Rs 1,647 per tonne, a hike of 35 per cent if the authority's recommendations are approved.

"Steel industries are already coping up with high input costs. Any move to burden them further with increase in freight costs defies logic", said Ranjan Mishra, executive director, Visa Steel.

The last notification on freight rate was in November last year. Transporters, however, were not satisfied with the revised rates and had petitioned the Odisha High Court. Based on the petition filed by the transporters, the court had directed the state government to have another round of negotiations and reset the transportation cost. But, the new rate structure has been fixed without consultation with the user industries.

Steel units have already invested over Rs two lakh crore on their projects in Odisha.