Rail iron ore freight up 14%

SAIL, Tata Steel to be affected

The railways have raised the tariffs charged for iron ore meant for steel plants by nearly 14 per cent from May. This will affect companies like SAIL, Tata Steel, IISCO, Jindal and Rashtriya Ispat Nigam Ltd.

The railway ministry, in a new circular, reversed the distinction made in the Budget for 2005-06, where iron ore for exports was charged a 14 per cent higher rate than that meant for steel plants with sidings.

A 14 per cent rise will translate into an increase of Rs 51 per tonne of iron ore hauled. Steel plants earned Rs 26,000 on 1 tonne of steel sold, railway ministry officials said, indicating that the plants could bear the cost comfortably.

For 2005-06, nearly 34.8 million tonnes of iron ore are expected to be carried to steel plants. This means that the railways will earn approximately Rs 177 crore more this year on this account.

According to the Budget proposal, iron ore for steel plants with sidings will be charged in the tariff class of 140, with the railways earning 40 per cent above the cost incurred by it.

With the new order, effective May 15, iron ore for steel plants will be in the class 160 applicable to ore meant for export.

"We have increased the rates keeping in mind that steel companies are sitting on piles of profit. Steel plants plan to increase prices further by 20-25 per cent," a railway ministry official told Business Standard. He added that the decision had also been taken to bring uniformity in tariff.

Ministry officials added that with steel prices spiralling, there would be a greater burden on the railways, which is one of the largest consumers of steel.

"With steel plants not sparing the railways from price hikes, there is no reason why they should be given a discount," a ministry official said. 

Bearing the brunt

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• A 14 per cent rise will translate into an increase of Rs 51 per tonne of iron ore hauled
  
• Steel plants earned Rs 26,000 on 1 tonne of steel sold indicating that the plants could bear the cost comfortably
  
•   For 2005-06, nearly 34.8 million tonnes of iron ore are expected to be carried to steel plants. This means that the railways will earn approximately Rs 177 crore more this year on this account
  
•   According to the Budget proposal, iron ore for steel plants with sidings will be charged in the tariff class of 140, with the railways earning 40 per cent above the cost incurred by it 
  
•   With the new order, effective May 15, iron ore for steel plants will be in the class 160 applicable to ore meant for export