Mining ban dents railway income

The ongoing mining crisis in Karnataka has now started eating into the freight earnings of Indian Railways, the national transporter that is already struggling to survive amid a fast eroding surplus. With this, the adverse ripple effects of the iron ore mining ban have extended beyond the steel sector’s output and the government’s multi-billion dollar foreign exchange earnings from iron ore exports.

Iron ore loading accounts for 15 per cent of railways’ freight earnings. Freight, in turn, contributes 70 per cent of the overall revenues.

Between April and November this year, the railways’ earnings from iron ore segment dipped 7.1 per cent to Rs 5,238 crore, according to fresh data released by the rail ministry. Last year, iron ore earnings had increased 2.6 per cent to Rs 5,640 crore from Rs 5,494 crore in the same period of the previous fiscal.

The current year’s dip in earnings from iron ore loading began in August, the month Supreme Court imposed a ban on mining and exports of the commodity from Karnataka, the principal iron ore producing state in India. The dip only got worse in subsequent months as November recorded Rs 459 crore, lowest in the past three years.

Despite the hit to iron ore loading this year, the railways’ overall freight earnings have increased 9.2 per cent to Rs 43,106 crore in the eight months period ended November, at the back of increased earnings from transport of coal that alone accounts for more than a half of the overall freight revenues.

The railways also had a mid-year increase in the busy season charge and development surcharge without any tinkering in the base freight rates, that allowed the national transporter to garner additional around Rs 1,000 crore.

Normal tariff rate is composed of base freight rate along with demand management charges like busy season charge, congestion charge and supplementary charges.

The development surcharge is levied on the net tariff rate.

The rates at which busy season charge and Development Surcharge are levied have been enhanced with effect from October 15, 2011.

The rate circular of ministry of railways said, “Busy Season charge in case of Coal and Coke stands revised from 5 per cent to 10 per cent and in case of all other commodities, from seven per cent to 10 per cent. The rate, at which Development Surcharge is levied, has been revised from two per cent to five per cent.”

With no signs of abatement of the mining crisis soon, experts believe iron ore loading could come under further pressure taking a toll on railways’ revenues.

Overall exports of the mineral were already projected to come down to 65 million tonne (mt) this fiscal owing to the mining ban as compared to 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.