With the Indian economy showing signs of revival, freight rates for bulk commodities, comprising iron ore, coal, cement and steel, might be hiked by the Railway Ministry. It is likely that the announcement for the same will be made in the Rail Budget 2010-11. According to a railway official who did not wish to be named, the hike could be around 10% for iron ore and steel and 5% for coal and cement.

It is believed that the hike in freight rates will escalate transportation costs for the aforementioned items by Rs 100-200 per tonne. The hike (if announced) will come after a gap of 1 year as railways had not hiked prices for bulk commodities in 2009, when the economy was reeling under recessionary pressures.

Industry irked

However, industry experts are of the opinion that this is not the apt time for railways to increase freight rates. In this context Amarjeet Kohli, managing director of Kohli Export Packaging India Private Limited, a mid-sized packaging firm in Pune says, “It is true that the economy has shown signs of revival, but complete revival has still a long way to traverse. The Railway Ministry should wait for another year or so before hiking the prices.” What has further irked the industry is that the proposal came soon after the Railway Ministry’s recent decision to exclude bulk commodities from incentive and discount schemes.

“Increase in freight rates will generate revenues for the railways but the same will definitely impede our growth and competitiveness in the global market,” says D Kumaresen, managing director of Uni Logistics Private Limited, a big-sized logistics firm in Chennai.

It is to be noted that demand for iron, steel, coal and cement has picked up in the last few months that in turn bolstered freight business for railways. Freight trade accounts for nearly 65% of gross revenues earned by the railways.

Arup Choudhury