Iron ore crisis hits rail freight earning

The crisis in production and export of iron ore in the South has cost Indian Railways Rs 1,144 crore this financial year.

The revenue loss from transporting ore, the second-largest contributor to railways’ freight earnings after coal, comes at a time when the cash-strapped transporter is struggling to manage finances amid a massive Rs 16,000-crore annual loss in earnings from the passenger segment.

For 2011-12, Indian Railways has a target of loading 115 million tonnes of iron ore, expected to contribute Rs 9,035 crore. Between April 2011 and January 2012, was aiming to load 95 mt, which was to bring in Rs 7,410 crore. However, only 87 mt was loaded, bringing in Rs 6,266 crore. This year’s loading is 13 per cent less than that of the same period last year (April-January 2010-11).

Iron ore loading accounts for 15 per cent of the railways’ freight earnings. Freight contributes 70 per cent to revenue. The dip in earnings from iron ore loading began in August, when the Supreme Court imposed a ban on mining and export of the commodity from Karnataka, a principal producer.

The rail ministry maintains its hands are tied on the issue. “If a ban on mining impacts railways’ loading, what can we do?” asked a senior official.

The ministry is, however, hopeful the latest freight rate would offset the loss to some extent. It recently announced a 20 per cent hike in the iron ore freight rate with effect from March 6 this year.

The railways had increased busy season charge on iron ore from 7 per cent to 10 per cent from 15 October, without tinkering the base freight rate. Development surcharge rate was also revised from 2 per cent to 5 per cent.

The increased charges allowed railways to garner additional Rs 1,000 crore.

Usually, tariff rate is composed of base freight rate, demand management charges, congestion charge and supplementary charges. The development surcharge is levied on the net tariff rate.

With no signs of abatement of the mining crisis soon, experts, say iron ore loading could come under further pressure, taking a toll on railways’ freight revenues for the year. Overall exports of the mineral were already projected to come down to 65 million tonnes this fiscal owing to the mining ban, against 97 MT last year. With the government’s latest decision to impose a 30 per cent export duty — a six-fold jump over the last year’s level — miners have now slashed exports forecast further down to 50 MT.