New rail freight scheme to raise rates 20-25%

Source: Business standard, Mar 07, 2012

New Delhi: Days before the Budget, the railways have effected major changes in freight slabs, which would result in a 20-25 per cent rate increase over the same distance. Also, by abolishing the classification for fertilisers and food grains and bringing them under a higher slab, the railways have raised freight rates for these commodities.The notification of the changes came on a day the Congress faced electoral losses in state Assembly elections.

The changes, with immediate effect, are expected to fetch Indian Railways Rs 10,000 crore in additional revenue annually, according to railway officials. The railways rate commodities in the same category according to the distance over which they are moved. The new notification drastically reduces the distance slabs for all commodities from around 174 to 37. In a concession, rates for iron ore exports, shifted from the most expensive class 200 to class 160, have been reduced up to four per cent.

According to the rate circular, the intermediate class of 130-A has been abolished and restored to Class 130. The class 130-A, which stands abolished with effect from March 6, 2012, includes the broad categories of chemical manures and food grains, flour and pulses. The rates in class 130 are 20-37 per cent higher than class 130-A depending on the distance covered.

Commodity Class Distance
%  chg
in freight 
150 500 20.01
Iron ore Shift from 
200 to 160
600 -4.00
Fertilisers Shift from
130 A to 130
700 23.14
Food grain Shift from 
130 A to 130
800 18.42
Source: Indian Railways

Though the railways have changed rates outside the Budget, they have not touched passenger fares. After 2002-03, when the then railway minister, Nitish Kumar, partially tried to align passenger fares with costs, passenger fares have not been raised. According to the railways’ internal data, passenger fares in 2009-10 were subsidised to the extent of Rs 20,000 crore from the freight traffic.

The railways had increased the busy season charge and development surcharge on freight from October 15, 2011. Busy season charges for coal and coke were revised from five to 10 per cent and in the case of all other commodities, from seven to 10 per cent. The rate of development surcharge was also revised from two to five per cent.

All commodities have been classified into 16 different categories for the purpose of charging freight. From 2003-04 onwards, the railways have gradually reduced the number of classes from 59 to 16. Along with reducing the number of classes, the total number of commodities so classified has also been cut. An overriding clause stipulates if any commodity does not figure in the list of commodities classified, it is charged at FAK (freight all kind) rates based on wagons in which these commodities are loaded at a class indicated in the goods tariff of the Indian Railways.

Among the 16 classes in which the commodities are classified, four — class LR4, LR3, LR2 and LR1 — are subsidised. The commodities in class 100 are carried at the break-even point.


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