Change in Freight Rate Structure is a Revenue Neutral Model: Member-Traffic

Member-Traffic corroborates that the coal-traffic target for this year is set at 580 million tonnes

Mohammad Jamsheed, Member-Traffic, Railway Board
Mohammad Jamsheed, Member-Traffic, Railway Board

The Railways has chosen to alter the freight rate structure for coal, hiking rates for short-haul traffic, and lowering the same for coal freight beyond 700 km; said Mohammed Jamshed, Member – Traffic, Railway Board about the changes. Excerpts:

Why did the Railways decide to make the changes in the rates for coal-freight traffic?

The Budget in February had put certain high targets in anticipation of robust economic growth in various sectors. Coal is the mainstay for Railways’ freight traffic — about 580 million tonnes out of the 1.1 billion tonnes that we load every year. We have been constantly monitoring this segment.

A number of reforms on freight rationalisation for different sectors were announced in the Budget. For the first time, we have reduced the freight rates and withdrawn surcharges that had been levied for the last couple of years. These were levies that were affecting traffic and moving it towards roadways.

Our whole effort, despite tepid growth in the core sectors, has been to regain lost share. In this exercise, our coal-traffic target for this year, set at 580 million tonnes, was based on projections given by Coal India.

In the last three-four months, we have not been able to transport the kind of coal that was anticipated. This was because of very tepid and sluggish demand from power houses. Thermal power coal loading and the average distance of 600 km were well below estimates as well. Along with the Coal Ministry, we studied ways to increase rail’s share.

Please explain how the rate structure increases for coal carried for 200-700 km, and how it comes down beyond 700 km.

This is a revenue-neutral model. We want to move more coal along long-lead destinations. We found that there has been significant reduction in movement and transportation of coal beyond 700 km. For a large number of power utilities in Punjab and Maharashtra, the plant-load factor has come down, and demand is falling as well — so we’ve not been able to move much coal there. So for 700 km and beyond, we have chosen to give certain kinds of incentives and concessions to long-lead traffic of coal.

How much is the concession?

It would broadly be in the range of 4-13 per cent.

And consequently for 200 km to 700 km, how much is the rate of increase?

Certain rationalisation would result in a 7-13-per cent hike on the sector between 200-700 km.

With both the amount of the cut and the hike broadly in the same range, what does the Railways hope to achieve by this?

We want to increase the tonnage on the long lead. Our entire revenue is based on the net tonne kilometres. During the first four months, leads go down from 532 km to 473 km and the net tonne kilometres is hit by 10 per cent. That in turn has hurt the rail-freight growth by 10-15 per cent. If we start moving our coal to long destinations, the volumes will grow. And those higher volumes will compensate for the concessions we are giving.

The circular speaks of a coal-handling charge at loading and unloading…

This surcharge is not connected with the freight. We have created certain infrastructure on the back of huge investment. Capacity is being augmented into second, third and fourth lines. We are also inducting higher horsepower locomotives. All of this is being put in place to handle demand as and when it builds. All of this is a cost. The surcharge is in that regard.

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