Rail freight hike to hit only steel, say coal users

The Coal Consumers Association of India (CCAI) representing both core and non-core sector industries has demanded the roll-back of the 7.7 per cent hike in railways freight on coal that was made effective from last month.

Steel majors like Tata Steel and Steel Authority of India (Sail) had earlier criticised the freight hike by Indian Railways and said it had discriminated against the steel industry as other industries like cement were not under its purview

"This will directly hit the bottomline. For example Tata Steel carries four million tonnes of coal through the railways. For two million tonnes its average freight per tonne is Rs 200 while for another two million it is Rs 400 per tonne. This will lead to a Rs 100 million rise in freight cost at Tata Steel. The total expenditure on account of freight at Tata Steel is around Rs 1,200 million," explained Gautam Kumar, president of CCAI.

Steel Authority carried 12 million tones of coal through the Railways at average freight was around Rs 550 per tonne.

The public sector steel major will have to shell out additional Rs 500 million as freight, the total cost being Rs 6,600 million.

"This will hit the bottomline as other input costs were also rising fast," explained Kumar.

CCAI has very recently made a representation to Indian Railways for review of the coal freight hike decision.

"Coal accounts for 70 per cent to 75 per cent of revenue for Indian Railways and in view of the rational an increase by one step from 130 to 135 class for 'Trainload' and 135 to 140 class for 'Wagonload' rate appears to be just and reasonable. The current increase in probably one of the highest ever hike on coal freight and will multiply the hardship of the industrial consumers and lead to inflation," explained Kumar.

Indian Railways hiked freight from 130 to 140 for Trainload and from 135 to 145 for Wagonload.

"Coal being the primary feedstock for power sector and being one of the basic raw materials for steel and sponge iron industry. Therefore, any increase in the railway freight rate of coal will inevitably hit these industries and will also have a cascading effect on other industries as well," he added.