Railways to withdraw 10% port congestion surcharge

Traffic handled at 12 major ports in India dropped 4% to 549 mt between April 2015 and February 2016

In a major bonanza for Indian shippers, the Railway Board has removed the port congestion surcharge levied on cargo moving to inland distribution points.

The move is likely to benefit companies in the coal and iron ore sectors, apart from shippers of containerised cargo. It will lead to 15 million tonnes of incremental traffic in the current financial year alone.

The railways had been levying the surcharge since November 2014 on companies importing goods as a compensation for the huge cost arising from the pressure on intermodal rail connection as a result of the surge in import volumes.

The surcharge, levied at a rate of 10 per cent of base freight rate, is applicable on all goods traffic, including containers, originating from the ports. “The circular for the withdrawal of the port congestion surcharge will be issued shortly. This is in line with the rail minister’s promise of making rail a competitive mode of transport vis-a-vis roads,” a senior rail ministry official told Business Standard.

A sizeable portion of India’s freight, particularly containerised goods, moves by rail, given the traditional cost advantage as compared to roadways, and ease of handling. The pace of containerisation of commodities has gained momentum in recent years following the entry of private players in the intermodal sector, a monopoly of the state-owned Container Corporation of India until 2006.

Traffic handled at 12 major ports in India dropped by more than 4 per cent to 549 million tonnes between April 2015 and February 2016 as compared to 527 MT in the corresponding period of the previous financial year.

Indian Railways is grappling with a severe drop in freight volumes thanks to a slump in core sector growth.

The railways missed a bulk of the last financial year’s target of carrying incremental freight of 85 MT with volume losses observed in all principal commodities of its freight basket including coal, iron ore, cement and food grains.