Indian Railways (IR), already facing rising working expenses, will further take a hit of Rs 460 crore with the government increasing diesel prices by Rs 2 per litre with effect from midnight.
A senior official at the rail ministry said, “We procure 2.3 billion litres of diesel every year for operating locomotives. With the hike, our expenditure on fuel is set to go up by 10 per cent.”
The national transporter, at present, spends about Rs 4,500 crore annually on diesel fuel expenses of its locomotives.
IR uses a mix of electric and diesel traction (the motor used to propel rail cars). About 51 per cent of the 11,000 passenger trains and 37 per cent of freight trains on the network work on diesel.
This is the second such hit for the organisation this financial year, with the government having imposed a service tax of 10 per cent for the transportation of goods on the rail network. Initially, the levy was to come into force from April 1.
However, on concern that it would further fuel inflation by raising the prices of coal, cement and steel transported via the railways, the Ministry of Finance had deferred imposition, stating that it would come into effect from July.
Since then, the railways’ ministry has not made headway in their appeal for a waiver. Authorities say the ministry has to shell out around Rs 750 crore in service tax for the rest of the financial year.
The railways’ financial health worsened over the past two years, with the operating ratio rising to 94.7 per cent in 2009-10 from 75.9 per cent in 2007-08. Total working expenses rose by 53 per cent in this time to Rs 83,440 crore from Rs 54,462 crore in FY08. The increase, officials claim, has largely been on account of the railways having paid over Rs 18,000 crore in Sixth Pay Commission arrears.