Hike in passenger fares also likely; Centre insists on service charge

The Railways intend raking in about Rs. 20,000 crore during 2012-13 from the across-the-board freight hike it effected on Tuesday, to ensure a 30 per cent growth in earnings under this head.

The abrupt increase was made, also in a desperate bid to balance the budget for the current financial year what with revenues not matching the targets. The revision will impact the price of almost all commodities transported by rail. Power generation too will become costly.

A hike in passenger fares may also be on the way with officials saying a decision has been taken not to continue with the practice of subsidising passenger fares with freight charges. Equally important is the Centre's insistence on imposing a service charge on the Railways and this may lead to a further rise in both fare and freight charges.

Top Railway Board officials said they had readied freight revision about two months ago but the exercise was kept in abeyance for electoral reasons.

The Railways have hiked the base rate for freight from Rs. 100 to 120, reduced the number of distance slabs from 174 to 37 and removed the distinction in charge rates. As a result, the cost of essential commodities like salt and sugar too will also go up by a minimum of 20 per cent. But officials claim that the impact will be less at the consumer level.

The officials refused to state in percentage terms the hike in freight rates of commodities, saying rationalisation was not done on that basis and it would differ from commodity to commodity.

The officials claimed that cement prices might increase by just three per cent, steel by 1.5 per cent and power by 3 to 3.5 per cent. They refused to clarify how the cost of cement at the end point would go up by just three per cent when the Railways happen to be the carrier of inputs to the manufacturing points as well as transporter of the final product — which means a compounded hike of at least 40 per cent.

The target earning from freight during the current financial year has been pegged at Rs. 68,000 crore, and an increase of Rs. 20,000 crore, by way of growth in volumes and rate hike, means a growth in revenue of almost 30 per cent.

Marginal rise

To specific questions on essential commodities, the officials maintained that price rise would be marginal in the case of salt, sugar, wheat, rice, other foodgrains and fertilizer.

While the Railways' contention is that they have done away with an ad hoc system, the fact remains they have adopted a dynamic pricing policy and have been revising freight rates from time to time keeping in view the economic conditions and requirements.

The officials claimed that they had addressed the fundamental principle of matching the expenditures of the Railways with the revenues, to meet working expenditures, which were in the region of Rs. 70,000 crore-Rs. 75,000 crore, and to provide for the depreciation fund and the development fund for renewal, upgrading and augmentation of the rail network.

The government budgetary support would be utilised for growth and expansion and for financing new projects.