Dual Freight Policy of 2008 caused IR a loss of ₹29,236.78 Crore: says PAC

railways-freight-trafficNew Delhi: The Public Accounts Committee (PAC) of Parliament has found that the Dual Freight Policy (DFP) of 2008 has caused the Railways a loss of ₹29,236.78 crore.

A report adopted by the panel said the loss includes freight evasion of ₹12,722.65 crore, non-imposition of penalty worth ₹11,418.16 crore on the defaulters due to partial or non submission of documents.

The loss figure excludes the penalty of ₹5,095.97 crore to be imposable for diversion of trading the iron ore transported at domestic rate.

Lack of enforcement

The panel, headed by Congress MP KV Thomas, said it could not find the rationale as to how a policy which was introduced to enable the Railways to accentuate its freight revenue has pushed it to sustain losses. “The Committee has come to understand that lack of enforcement of the institutional framework of the Dual Freight Policy, its monitoring and implementation and laxity of the then Railway administration have eventually led to freight evasion, non-levy of penalties for wilful non-compliance and under charge of freight,” the report said pointing fingers at the erstwhile UPA government.

Amount recovered

The panel said the Railway Ministry should have ensured strict compliance of laid down provisions and enforcement of initial scrutiny and check at all stages right from assessment of requirement of rules, allotment of rakes, acceptance of indents to loading and unloading. It urged the Centre to fix responsibility on the officials who dealt with the implementation of the policy for the losses incurred by the Railways. The report also noted that although the demand-cum-show cause notices issued to various delinquent customers amounted to ₹6,912.25 crore, only ₹141.09 crore has been recovered so far.

Systemic failure

The CBI told the panel that in the remaining cases, there was a systemic failure with the Railways in exercising effective monitoring and implementation of guidelines.

The panel asked the Railways to furnish the details of exact amount recovered so far and the status of the cases which were pending court decisions.

The Railways introduced the DFP in May 2008, when Lalu Prasad was Minister, and entitled the manufacturers of iron and steel to avail themselves of the benefit of payment of freight at domestic consumption rate subject to certain stipulations. Subsequently, manufacturers of iron ore pellets and cement were also included in that category.

“The primary objectives of the DFP were to lower the cost of transport of iron ore for domestic producers and to keep freight charges for export of iron ore in sync with its rising international spot market prices and garner high freight revenues in the event of increase in international price of iron ore.

The DFP, in effect, led to freight difference between the above two classes, which was on an average more than three times and hence left the policy vulnerable to exploitation by the exporters of iron ore to book freight at lower rates prescribed for domestic consumption by camouflaging their end use by either non-submission of documents or submission of false/inaccurate documents,” the report noted.