Fix­ing freight

Long-term con­tracts for rail­ways is the way to go

The Financial Express - - NEWS -

Though the fi­nances of the In­dian Rail­ways con­tinue to re­main in sham­bles be­cause of a slow econ­omy—en­sur­ing that it has con­sis­tently missed tar­gets for both freight and pas­sen­ger traf­fic—and the huge pay bur­den im­posed by the Sev­enth Pay Com­mis­sion, rail­way min­is­ter Suresh Prabhu is mak­ing im­por­tant moves in try­ing to steer the na­tional car­rier. Var­i­ous high-speed and bet­ter ap­pointed trains have been brought in to in­crease pas­sen­ger rev­enues while keep­ing the base fares largely un­touched—though fares on the higher-speed Ga­ti­maan Ex­press are around 47% higher than those of the older Shatabdi—and once the light-weight Talgo is in­tro­duced on the Delhi-Mum­bai route, for in­stance, its shorter du­ra­tion means the train can leave later at night and hope to catch some of the busi­ness traf­fic as well. And now, it ap­pears, sim­i­lar plans are be­ing made for the freight sec­tor—the big­gest change, of course, will take place in an­other cou­ple of years when the two ded­i­cated freight cor­ri­dors are in place since the speed of freight trains will re­ally pick up.

With the rail­ways dra­mat­i­cally over­charg­ing on freight in or­der to be able to sub­sidise pas­sen­ger traf­fic, its share of traf­fic has been fall­ing steadily; so, one of the things Prabhu is do­ing is to try and ra­tio­nalise freight. Earn­ings from coal have in­creased marginally, from R48,000 crore in FY15 to R52,000 crore in FY16 and are tar­geted at R53,685 crore in FY17 and earn­ings from food grains went down from R8,138 crore in FY15 to R7,731 crore in FY16, and are es­ti­mated at R8,085 crore in FY17. As a re­sult, av­er­age freight earn­ing growth has come down from 14.5% dur­ing FY12 and FY14 to 7.9% for the pe­riod FY15-FY17—as a share of over­all earn­ings, the share of freight is down from 67% in FY14 to 64% to­day.

As part of the new pol­icy, freight rates have been re­duced for the first timeever—port­con­ges­tion­charge­sand­busy­sea­son­sur­charge­have­been dropped and the dual pric­ing of iron has also been with­drawn, be­sides mea­sures like open­ing up of the con­tainer sec­tor for more com­modi­ties and multi-point load­ing fa­cil­ity. What is planned in­stead—this will be tried with ce­ment despatches within the next two months—is long- and fixed-term con­tracts with clients in re­turn for com­mit­ted freight con­tracts. The ex­act de­tails are yet to be fi­nalised but freight rates could re­main con­stant in this pe­riod or they could have a cer­tain share linked to a fuel in­dex—while this pro­vides cer­tainty of costs for pro­duc­ers/trans­porters, it also en­sures the Rail­ways have a steady stream of traf­fic and al­lows for bet­ter plan­ning as well.

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