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Rail freight hike culls wagon stocks

Though Suresh Prabhu's budget provides for procurement of 16,800 wagons, fears of commodity haulage on rail dropping hurts the stocks

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On the day the railway budget was presented, the blood on the street belied the mood among the private sector players whose fortunes are to a large extent dependent upon the wishes of Railways.

Stocks like Texmaco, Cimmco, Kalindee Rail Nirman and Stone India dropped by 2.5% to 6%. Titagarh Wagons, however, ended the day with a 0.5% after putting up a fight.

'Stocks of Railways related companies fell probably because of announcement of hike in freight rates. Stock market is driven by sentiment, which got impacted because of this step," said Titagarh Wagons chairman J P Chowdhury.

Chowdhury's view got support from the analyst community which pointed out that the deep cuts in most of the stocks happened only after the freight rate hike of an average by 2.7% was announced.

The announcements impacted altogether 12 commodities in the range of 0.8% to 10%. Rates on coal went up by 6.3%.

Strangely, freight rate hike won't impact the workings of Railways related companies but prices of the commodities and hence the fortunes of companies producing them or their user industries who now have to pay a higher price.

"Coal consumers are already burdened with additional levies like busy season surcharge and congestion surcharge. This increase in freight for coal may lead to around 2.5 % to 3% increase in cost of coal at the consumers' end," said a statement from Coal Consumers' Association of India.

As for wagon makers, railway minister Suresh Prabhu played Santa.

"The provision for procurement of 16,800 wagons in 2015-16 would bring cheer to the wagon industry which has been starved of adequate workload. Besides, the proposed incentivisation of the various schemes for adding to the fleet on rail network through wagon leasing, providing for commodity-specific new design wagons should help ease the railway finances, while adding to the freight carrying capacity," said Ramesh Maheshwari, executive vice-chairman, Texmaco Rail & Engineering Ltd.

The budget even went beyond ticking the stuff that have been appearing in most of the previous budget speeches like wagons, coaches, usual long list of passenger trains.

"Usually a long list of new trains take up half of the minister's speech. Thankfully, this time we were spared as no new train was announced," said Chowdhury of Titagarh.

Passengers' loss was clearly the industry's gain as Prabhu spent most of the time announcing some innovative ideas which would mostly benefit the private sector players whose scrips tanked during the speech.

"We will also consider new and lighter design of wagons for better fuel efficiency and carrying capacity," said the minister in his speech. Its music to the ears of companies like Titagarh, which has in its possession several state-of-the-art deigns for new age wagons most of which have been developed using the design expertise of its French arm Arbel Fauvet Rail.

Elsewhere in his speech the minister talked of several opportunities for the private sector to exploit.

Several other ancillary measures for wagon industry like future revision of the wagon leasing scheme and a new automatic freight rebate scheme for traffic loaded in traditional empty flow direction has been launched.
Prabhu also promised to work out modalities to facilitate provision of spare railway land and redundant goods sheds on nominal licence fee to private developers and working out a policy for redevelopment of stations, possibly with the help of private sector.

But news of these measures probably lost out to the negative sentiment that took over the investors' sentiment.

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