Steep 12% Hike In Railway Freight Rates

Freight, fare hike to net Rs 1,800 crore l Essential commodities spared l 10% increase in upper class fares

Railway minister Ram Vilas Paswan yesterday announced a steep 12 per cent increase in freight rates and a 10 per cent rise in upper class passenger fares while presenting the railway budget for 1997-98 in Parliament. The freight and fare increase, which will net Rs 1,800 crore, is the second in eight months.

In July last year, Paswan came out with a 10 per cent across-the-board increase in freight and upper class passenger fares to net Rs 927 crore in the eight months till February.

 

Living up to his pro-poor image, Paswan again refrained from raising fares of second class ordinary and second class mail and express trains, except for the sleeper class where fares have been raised by 5 per cent.

Paswan also proposed a 20 per cent surcharge on parcels and luggages carried by superfast trains.

The steep freight hike is expected to have a cascading effect on the prices of a range of commodities, Railway Board chairman C L Kaw admitted at the customary post-budget press conference.

Kaw estimated that the wholesale price index could rise by 0.127 per cent as a result of the freight hike.

The railways have estimated that the hike in freight rates would result in the price of coal going up by Rs 45 per tonne, HSD oil by 9.19 paise, petrol by 8.45 paise per litre and cement by Rs 2.45 per 50 kg bag.

A number of essential commodities including foodgrains and pulses, edibles oils, kerosene, sugar, liquefied petroleum gas, fruits, gur, shakar and jaggery have been exempted from the increase in freight rates.

Of the Rs 1800 crore that the railways expects to net from the freight and fare hikes, a sum of Rs 1,592 crore will come from freight. The upward revision of upper class fares is expected to net Rs 112 crore, while the sleeper class revision will bring in Rs 84 crore. The surcharge on parcels and luggages will yield Rs 12 crore.

The annual plan for 1997-98 has been pegged at the current years level of Rs 8,300 crore with a budgetary support of Rs 1,831 crore. Allocation for rolling stocks has been raised to Rs 4002 crore for the year.

While announcing the introduction of new trains, especially of the Rajdhani variety and extension of the routes of many others, the minister said the work on Diphu-Karong new railway line was being included as the first phase of broad gauge line to Imphal as part of government efforts for development of the backward north-east region.

Another Rs 75 crore has been allocated for the Udhampur-Srinagar-Baramulla line to connect Jammu and Kashmir with the rest of the country.

Paswan set a target of 430 million tonnes of revenue-earning freight traffic for 1997-98, which is 20 million tonnes more than the loading target for 1996-97.

He also projected a three per cent growth rate in passenger traffic during the coming year.

Both Paswan and Kaw felt that this was the best budget they could have come up with in view of their financial constraints and the compulsions of growth. The freight and fare hikes were prompted by the need to create a Rs 3500 crore corpus to implement the recommendations of the Fifth Pay Commission report, Kaw said.

The rise in freight is expected to trigger a shift to road transporters which could lead to a further erosion in the railways share of total freight. This could have a knock-on effect for the economy with a surge in the consumption of diesel and the consequent rise in oil imports.

World Bank experts have already disapproved of the existing railway freight structure by drawing attention to the fact that the rates in India are higher than those in the US taking into account the level of the purchasing powers in the two countries even if the rupee and the dollar exchange rate difference is taken into account.

The freight and fare hikes, according to the railways, were necessitated because of a shortfall in resource mobilisation to fund the next years plan size of Rs 8,300 crore. The scheme of financing is: yields from existing fare and freight ratesRs 1,619 crore, budgetary support Rs 1,831 crore, market borrowing by Indian Railway Finance Corporation- Rs 2,150 crore, and build, own operate and transfer and own your wagon schemes-Rs 900, making for a total of Rs 6,500 crore. The 1997-98 plan outlay, however, shows a zero growth compared with the plan size in 1996-97. The size originally approved was Rs 8,130 crore but was enhanced to Rs 8,300 crore after the government made available an additional support of Rs 170 crore. It is the same size this year too, though Paswan expected an increase in future.

The operating ratio significantly has gone up from 86.3 per cent in the 1996-97 budget to 91 per cent in the 1997-98 budget estimates, indicating higher operating costs in the coming year. This will also mean a drop in profitability as the percentage of net revenue to capital-at-charge (Rs 30,700 crore) has gone up from 12.2 per cent in 1996-97 to 8.9 per cent in 1997-98.

There is also a decline in gross traffic receipts by Rs 350 crore which Kaw attributed to the fall in the availability of the freight traffic from October onwards. His hunch was that the drop in freight earning was because of the drop in industrial production and economic slow down.

However, the finance ministry does not subscribe to this view and thinks the traffic diversion to roads may be responsible for this, because of the consistent rail freight hike over the years.