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Hike hits railways the hardest

Friday, 18 January 2013 - 5:00am IST | Place: New Delhi | Agency: dna

Railways spend Rs7,000cr on diesel as 70% of its traffic runs on it.

The government’s decision to deregulate diesel prices will have a bearing on the transport sector, mainly railways and road transport,  which would essentially mean that the common man will have to shell out more for day-to-day articles. The only saving grace, it seems, is a calibrated approach to price revision. 

The railways, for instance, consumes approximately 240 crore litres of diesel annually for which it pays Rs7,000 crore to the oil marketing companies. Almost 70% rail traffic depends on diesel and a Rs2 per litre hike will mean an additional Rs480 crore outgo on working expenses.
So what does this mean for the consumer and passenger? A railway ministry official said that now that there is no need to wait for the budget to alter the fare, the ministry may raise fares if need be.

Experts, however, feel that any fare hike will just help raise paltry sum and the ministry needs to take some harsh decisions. “The recent hike will help rake in a mere Rs 6,600 crore. The fundamental thing is that the railways has to reduce working expenses by implementing modernisation and pruning a mammoth 14 lakh workforce,” said an analyst who wished not to be quoted. 

Road transport will also see an impact, but it will be spread if the hike is staggered than one-time. For instance, a Re1 per litre hike on the Delhi-Mumbai-Delhi round trip will entail Rs700 in the truck freight at Rs1.5% on the present round trip charges of Rs54,000.

According to the Indian Foundation for Transport Research and Training, the weighted impact of the diesel price hike through truck rental increase on bulk cargo like cement, marble, timber, food grains should be 0.5% - 0.6% on total price of these products. On fresh fruits and vegetables the impact will be by 1% - 1.5% and on FMCG, white goods, pharma products, electronic goods by 1.5% - 2%.

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