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Indian Railways are one of the largest consumers of High Speed Diesel and Iron and Steel consuming over 2000 million litres of Diesel and nearly 1.4 Million Tonnes (MTs) of steel every year. The impact of the three hikes in the diesel price on the fuel bill of the Railways has been around Rs.540 crore during the current year. Impact for the next year is estimated to be around Rs. 940 crore, provided there is no further increase in diesel prices. The Steel Industry has also hiked steel prices repeatedly and the expenditure of railways on purchase of steel and wagons has increased significantly.
Freight rates for Coal, Iron Ore, Limestone, Dolomite, Gypsum, Bauxite, Manganese Ore, Cement and Clinker have been increased from 27th November, 2004. The freight of Coal, Iron Ore and Manganese Ore and Clinker will be higher by 7.7%. The freight rates for Cement will be higher by 3.7%. These adjustments in freight rates are estimated to yield an additional revenue of the order of Rs. 400 crore for the remaining period of the current year 2004-2005 to offset partially the additional burden of the fuel bill and Steel prices.
There has been no across-the-board increase in freight rates by the Indian Railways for the past three years. Railways have so far been absorbing fully the increase in its fuel bill and other working expenses.
There has been an unprecedented demand for transportation of Iron Ore for export. The classification of Finished Iron & Steel was reduced from Class –190 to Class-180 in 2003-2004, reducing the freight by 5.3%. However, the increase in the freight of one tonne of Iron Ore at an average lead of around 386 kilometres will be only Rs.48.60 per tonne. The effect of increase in the iron ore freight will be only around 0.30 per cent on the price of one tonne of Finished Steel.
Taking 1982-83 as the base year, the index for freight rates for Coal has increased by 4 times, whereas the All India Consumer Price Index (CPI) has increased by five times and the Pithead prices of Coal have increased by nearly six times during this period. There has been no increase in freight rates of coal for the last three years. During the last seven years, Coal freight has increased merely by one per cent per annum on an average. However, the effect of the current increase in Coal freight at an average lead of 600 kilometres is only 3.59 paise per kilogram of Coal. As 0.7 kilogram of Coal is consumed for producing one unit of electricity, the effect of freight increase will be only around 2.5 paise per unit (kwh) of electricity.
A single uniform Class –140 has now been assigned to the minerals transported by Railways namely Coal, Iron Ore, Limestone, Dolomite, Gypsum, Bauxite and Manganese Ore. The freight rates for the entire group of “Raw Materials for Steel Plants” has been rationalized uniformly at a single Class-140 at par with Coal. The classification of Bauxite, which is the main raw material for manufacturing Aluminium, has also been brought at par with Iron Ore.
The classification of Cement, which was reduced from 140 to 135, in 2003-04, has been re-stored to its original Class-140. The classification of Clinker, which is the penultimate stage of cement, has been brought at par with Cement. The rail freight for Cement and Clinker at an average lead of about 560 kilometres will be only Rs. 471 per tonne.
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