Freight rates to come down

The railways may soon revise freight for finished steel, cement and petroleum oil and lubricants (POL) downward in an attempt to gain market share in transportation business.

The railways board will shortly consider a proposal for lowering haulage charges for petroleum by 16 per cent, steel by 5.5 per cent and cement by 7.14 per cent.

"We are looking at ways to increase our share in petroleum, where we have been consistently losing traffic to pipelines. In case of finished steel also, the railways are struggling to retain their share," a senior railway ministry official told Business Standard.

Earlier this month, the railways lowered rates for about 10 commodities, including steel pipes, iron rod coils, stones, fly ash and coconut husk.

According to the proposal, the POL rates will be brought down from the present tariff class of 240 to 200, where the railways will earn 100 per cent over the carrying cost of the commodity.

For steel, the class is expected to be revised from 180 to 170 and for cement from 140 to 130, ministry sources said.

A reduction in freight for POL and steel just two months after a relief announced by the Budget indicates that the railways are serious about giving tough competition to roads and pipelines.

According to the Budget announcement effective from April, the railways had reduced freight for POL by 4 per cent and that of finished steel by 25 per cent.

The move to reduce cement tariffs came after a class hike from 135 to 140 in November 2004.

For cement, however, the other option for the ministry was to offer rebates under special schemes where discounts were available only on particular routes where the railways carried empty wagons.

Traffic figures for April-May, 2005-06 revealed cement as a cause for concern since it had the highest shortfall compared with the target. It was lower than the projected traffic by 0.69 per cent. The POL traffic was 0.07 per cent below expected traffic, despite a modest target.