Indian Railways’ strained financial condition compelled yesterday’s decisions to raise freight rates by around 20 per cent.
The move was in the works but held up due to elections in five states — Goa, Manipur, Punjab, Uttarakhand and Uttar Pradesh — said rail ministry sources. The base freight rate has been changed after about eight years.
As the railways were barely managing to allocate anything to the Depreciation Reserve Fund, the Development Fund and the Capital Fund, there was no option, said a senior official. The composite index of input costs has risen 100 per cent on a 2004-05 base.
However, the rise would hit harder at the existing problem of competing with road transport. “To do this without raising passenger fares is not right. This is subsidising household consumption from industry and will definitely result in reducing the railways’ freight share, compared to roads,” said Rajiv Kumar, secretary general of Federation of Indian Chambers of Commerce and Industry.
Increasing the freight rate is a quick-fix solution to raise funds; the strategy should have been to spend for commercial projects and capacity augmentation to carry more volume, agreed the rail official.
Narendra Modi, chief minister of Gujarat, has sent a protest letter to the prime minister. “A major decision, with huge implications, has been issued bypassing Parliament,” goes the letter.
The railways say they expect to get an additional Rs 15,000-20,000 crore in freight earnings in 2012-13, due to the rate rise and also additional traffic volume. In 2011-12, the budgeted traffic volume was 993 million tonnes and freight earning was Rs 68,000 crore. They are expected to fall short due to economic slowdown and the ban on iron ore mining.
