Freight hike to earn Rs 400 cr

The hike in freight rates, announced by the Indian Railways today, is expected to generate about Rs 400 crore during the remaining part of the current year.

This would help the ministry partly meet the Rs 540-crore burden on account of higher diesel prices. The freight rates were increased by 3.7"�7.7 per cent with effect from November 27.

The hike in the rates was imminent, as the Railways had been absorbing the increase in the prices of steel and diesel for some time. The diesel price hike alone is expected to cost the Railways Rs 958 crore next year, according to an official release.

Officials said the ministry was having difficulty sustaining the higher costs. "The net earnings till October were Rs 500 crore, and without a hike we would have been under constraint for the remaining period," Financial Commissioner Vijaylakshmi Vishwanathan said.

Officials did not foresee a dent in revenues owing to diversion of freight traffic to other modes.

"There has been no increase for the past three years. In fact, we have been bringing down certain items like iron ore to classifications with lower freight rates. The industry has also benefited from these measures," said Vishwanathan.

"There is, in fact, a capacity constraint with a shortage of wagons. Requests for carrying traffic or indents have been piling up for all kinds of cargo, especially coal," another official added.

He also added that the Railways was unlikely to lose market share in terms of cargo like coal, iron ore, manganese ore and iron clinkers, which saw the highest hike in freight rates (7.7 per cent).

During the first seven months of the year, freight earnings went up by a healthy 9.4 per cent to Rs 16,865 crore.

Transportation of cement, which could be diverted to alternative modes, has seen a marginal hike of 3.5 per cent. Its share in total freight revenue at 8 per cent is also much lower than coal and iron ore.

Balancing costs

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• Higher diesel prices have put an additional burden of Rs 540 crore on the Railways. Steel prices have also gone up
• The increase in freight rates would help the ministry partly meet this burden. Officials say hike in rates was inevitable
• Ministry does not foresee a dent in revenues owing to diversion of traffic to other modes