The Indian Railways has decided to increase its freight charges to partially offset mounting losses. The step may help the railways to an extent, but people will have to bear the cascading effect.
Brace yourself for further increases in the prices of essential commodities.
The Indian Railways has decided to increase its freight charges to partially offset mounting losses. The step may help the railways to an extent, but people will have to bear the cascading effect.
Since traders will now shell out more to transport food grain, fertilisers, cement, iron ore and coal on trains, they are certain to pass the cost on to consumers.
The decision of the railways comes at a time when the entire country is reeling from rising prices. Food inflation is already hovering at 9.2%.
A closer look at the figures in the rates circular issued by the Railway Board on October 12 shows that freight prices of all commodities have been increased by 10%. This hike comes on the heels of an increase in freight charges levied in March.
The movement of goods across the country peaks in March, termed “busy season” in railway parlance. The railway ministry had then imposed a 7% increase on all commodities for the period October 2011 to March 2012. But the rates have again been revised: this time to 10%.
The circular says the increased rate will be applicable till
June 2012.
The railway ministry defended the move. A senior official cited rising operating costs as a reason. Also, the ministry has taken a lot of flak from the finance ministry and the planning commission over its dwindling reserves — from Rs13,000 crore in 2008, the reserves have come down to a paltry Rs75 lakh.
“Everything depends on the manufacturers,” said the senior official. “Nothing will happen if they do not pass on the burden of paying more in freight charges to consumers.”
But what should they do about their shrinking margins? The answer is anybody’s guess.
The railway official, however, maintained that the hike would not affect people and stoke inflation. “A major chunk of food grains and fertilisers carried by the railways is meant for the public distribution system of the Food Corporation of India,” he said. “So, even if there is a hike, it is balanced by a subsidy from the central government.”
But the fact is if the subsidy bill goes up, the fiscal burden is bound to have a negative trickle-down effect. Figures show that almost 10-15% of the commodities currently transported by the railways is meant for general consumption. So, a hike in prices is the natural outcome.
Under the revised rates, traders will have to pay Rs100 more per tonne for every 1,000km. The railways had projected that nearly 45 million tonnes of food grain and 50 million tonnes of fertilisers would be transported this fiscal. The latest hike will affect industrial output as transporting iron ore or coal or cement would now be costlier. The industrial output registered a 4.1% growth in August. Last year it had registered 4.5% in the same period.
The railway ministry defended the move to increase the charges. Senior official cited rising operating costs as a reason. Also, the ministry has taken a lot of flak from the finance ministry and the planning commission over its dwindling reserves — from Rs13,000 crore in 2008, it has now come down to a paltry Rs75 lakh.
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