Parliamentary committee bats for annual review of rail freight rates

Advertise on rail coaches, wagons for revenue boost, says panel

The Ministry of Railways should conduct annual comprehensive assessment of its freight rates and rationalise the same to effectively compete with road transport and other modes, the Parliamentary Standing Committee on Railways said on Tuesday.

 

"The committee observed that the last revision of freight rates was undertaken in 2018 and that rates have remained unchanged since then. This approach reflects a strategic intent to balance multiple objectives like encouraging higher freight volumes, managing financial constraints, maintaining competitive pricing, and responding to prevailing economic conditions,” the panel said in a report.

 

The committee urged the national transporter to undertake an annual comprehensive assessment of freight rates, taking into account commodity-wise competitiveness, prevailing market demand, and operational costs. “Based on such an assessment, the committee recommends rationalisation of freight rates to enhance competitiveness vis-a-vis road transport,” it said. 

Chaired by C M Ramesh, a Bharatiya Janata Party (BJP) MP from Andhra Pradesh, the panel also recommended that the ministry should look for ways to increase non-fare revenue. “In particular, the committee suggests that advertising on rail coaches and wagons be pursued earnestly as a viable revenue-generating initiative,” it said. 

The Ministry of Railways has proposed a target of reaching 3,000 million tonnes (mt) of freight-loading by 2031, citing that work on several big-ticket infrastructure projects is ongoing.

 

The ministry justified the lack of a revision in freight rates in the last seven years despite increasing costs of operations with the rationale that it is a strategy of Indian Railways to strike a balance between encouraging higher freight volumes, managing financial constraints, competitive pricing, and responding to economic conditions.

 

“Moreover, the outbreak of Covid-19 also impacted the overall economy of the country, and unchanged freight rate has provided a timely boost to the economics of rail as well as the country,” it said. Freight rationalisation is undertaken keeping in view the change in demand pattern, pricing in competing modes, changing market dynamics, etc., the ministry told the panel.

 

While freight diversification is underway, the national transporter said it will continue to bet on the growth of coal to drive its freight growth in the future.

 

“What we can see is that 70 per cent of our loading is largely by coal, iron ore, cement, and clinker. While we think coal will go away in times to come, it is not the case. Even now there are a large number of projects which are coming afresh on coal, and we have a plan to further increase the loading in coal,” the ministry told the standing committee.

 

The committee also recommended that the railways find ways to encourage private participation in the funding of dedicated freight corridors (DFCs).

 

“Given the substantial capital requirement of DFC projects, and the need for budgetary support across various railway infrastructure and modernisation initiatives, the committee recommends that the Indian Railways make concerted efforts to attract private sector investment for future DFCs by offering commercially viable and attractive terms,” the panel said.

 

Moreover, the ministry is also dealing with a larger problem on DFCs, that is lack of crew availability – an issue that the panel asked the ministry to resolve. “Recognising that development of DFCs is highly capital-intensive, the committee emphasises the importance of evaluating economic returns relative to investment and overall project cost,” the panel said. 

Rates have not been revised since 2018

• Move seeks to enhance competitiveness vis-a-vis road transport
• Assessment of freight rates to consider commodity-wise competitiveness, prevailing market demand, and operational costs
• The ministry asked to look for ways to increase non-fare revenue
• Advertising on rail coaches and wagons be pursued earnestly