Rail haulage rates may go up on steel prices

Indian Railways -- the largest consumer of steel in the country -- is working out ways to tackle the recent rise in the prices of steel, including a possible revision in freight fares.

The railway ministry has set up a three-member committee to recommend ways and means to compensate suppliers and contractors of railways for the rise in steel prices.

A release issued by the railway ministry says the committee will decide on the extent of compensation provided to contractors and suppliers following "the abnormal increase in the prices of steel products".

The committee comprises three executive directors -- stores, track maintenance, finance -- and has been given two months to work out the details.

Most of the contract projects of the railways, like laying rails, bridges and other civil works use a large amount of steel.

The release says the reworking of prices will cover fixed rate contracts also. Suppliers and contractors have told the ministry the steel price hike has made unviable most of their cost estimates, and unless the same are revised they cannot be executed.

In such circumstances, the railways will have little option but to revise freight rates in the forthcoming Budget. Railway board officials said they had taken up the issue with the steel ministry.

The latter has advised the railways that it may have to scale down the annual target for hauling bulk steel for the current fiscal.

In 2003-04, the railways had set a target of transporting 14 milllion tonnes of iron and steel. This was 3 per cent of its annual freight target in terms of volumes and 5 per cent in terms of total earnings.

The officials said the double impact of the rising cost of contracts, estimated at above 10 per cent in most cases, and the reduced target of steel haulage will have severe repercussions on the financials.

They said the looming impact of rising diesel prices was also something they would have to factor in.

The release says the committee of executive directors will also recommend a policy directive and mechanism to be adopted by the different zones, production units and construction organisations to compensate for the hike in steel prices.

The recommendations will include steps to be taken to handle the situation when prices of steel products used in the supply and works contracts go down.