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Lalu’s success rides on freight-rate hike

Lalu’s success rides on freight-rate hike
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First Published: Thu, Feb 22 2007. 04 26 AM IST
Updated: Thu, Feb 22 2007. 04 26 AM IST
New Delhi: The celebrated turnaround of the Indian Railways appears to have, in part, been built on sharp mid-year increases in what it charges for transporting freight.
Typically, the railways announce their freight rates for the year in the annual Railway Budget, with each commodity classified at a particular rate, as they will do next week in their new budget.
But reporting by Mint suggests that over the last two years, the railways have resorted to mid-year revisions in freight rates outside the purview of the annual budget exercise, resulting in significant additional revenue accruals, in the case of some commodities as much as Rs1,000 crore in just one year.
It appears the railways have now begun tinkering with this classification in the middle of the year, resulting in higher freight rates on bulk items such as foodgrains, cement and iron ore. In the last two years, they have revised rates for 10 commodities at least.
Sources in the government said that in just the last year, the railways have earned around Rs700-1,000 crore for transporting foodgrains at higher rates than promised in their budget. “There has been an increase of around 30% in freight charges of foodgrains last year,” says an official who didn’t want to be quoted.
There is nothing illegal or wrong in what the railways have done, but it is a clear departure from previous practice and appears to be one of many reasons why the railways are being seen as a turnaround success story.
Officials at the ministry of railways declined to respond to questions about this mid-year change in freight rates.
As an institution, the railways have witnessed a sharp turnaround, led by improved collections of freight charges, in their performance in the last two years.
Bulk of the credit has gone to railways minister Lalu Prasad Yadav who has brought a populist yet pragmatic face to the organization.
News of the multiple mid-year changes in various freight rates caught some by surprise.
CPI(M) leader Basudeb Acharya, who also chairs the parliamentary standing committee on railways, maintained that the strategy adopted to earn more revenue appears to be unethical. “If there is any increase (in freight charges) it should be done at the time of the budget,” he said. “After the budget there should not be any change in classification.”
A look at government data shows that rail freight revenues grew much faster than freight loading. In 2005-06, total freight collections rose 18% to Rs33,480 crore, while freight loading, the amount of freight carried, rose 10% to 635 million tonnes.
In the case of foodgrains, for instance, the Food Corporation of India, another government entity, absorbed the additional freight costs but eventually transferred the higher costs to the Central exchequer. The government, in turn, accounted for this in the form of higher food subsidy payments.
Similarly, the rail ministry is expected to have earned an additional Rs500 crore last year by upgrading the freight classification for fertilizers.
“Many letters have been written to the finance ministry but they have not been able to force any substantial reversal in freight charges,” said another official.
Private players have not been as lucky. Recently, limestone traders based in West Bengal and Jharkhand have said that many businesses in the state had to shut shop due to the recent change in freight classification.
The changes made in the first week of this month, mere weeks away from the presentation of the new Rail Budget, has meant that the railway freight charge has increased by about Rs 2,200 per wagon, the Dankuni Stone Dealers Association said in a petition to Acharya earlier this month.
“At this juncture, thousands of businessmen and labour(ers) who are solely dependent on the Railways will be jobless,” the petition said.
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First Published: Thu, Feb 22 2007. 04 26 AM IST
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