BackRail budget: Higher freight rates for select commodities from 1 April
Rates for carriage of grains, pulses and urea were increased by 10% while coal charges were raised by 6.3%
Premium(Priyanka Parashar/Mint)
Mumbai: The railway budget presented on Thursday raised freight rates for select commodities including coal, cement, iron ore and steel from 1 April while keeping the passenger fares unchanged.
According to the rail budget document, freight rates for carriage of grains, pulses and urea were increased by 10% while coal rates were raised by 6.3%.
Cement freight rate was increased by 2.7%, while scrap and pig iron rates were hiked by 3.1%. The freight rates for bitumen and coal tar were hiked by 3.5%, while steel rates were hiked by 0.8%.
“The cement manufacturers will be hit by the hike as rates for carriage was hiked by 2.7% and coal rates hiked by 6.3%. There is already overcapacity in the market," said Sachin Bhanushali, chief executive officer of GatewayRail Freight Ltd.
On 20 February, Mint reported cement makers had reversed price increases announced in January as demand for the building material didn’t rise as anticipated.
The Indian cement industry is likely to end fiscal year 2014-15 with a capacity surplus of more than 100 million tonnes, according to a February presentation to investors by UltraTech Cement Ltd, the country’s largest cement maker.
While announcing the railway budget for 2015-16, railway minister Suresh Prabhu said that the Indian Railways must expand freight handling capacity in tandem with expansion of freight carrying network capacity.
“We will grow our annual freight carrying capacity from 1 billion to 1.5 billion tonnes," the minister said.
The freight hikes for coal, and cement and slag transportation will have an effect on the margins on the core sector companies like cement, steel and power, said Pankaj Kulkarni, director at JSW Cement Ltd.
JSW Cement is a unit of JSW Group and the company’s plants at Vijayanagar in Karnataka, Nandyal in Andhra Pradesh and Dolvi in Maharashtra utilize slag from the JSW Steel Ltd plants to produce cement.
“Currently, slag with good cementitious property generated in steel plants is being consumed by cement plants but a hike of 2.7% will make transportation of slag unviable for companies farther from these steel units," said Kulkarni.
“Also more than 50-60% of cement produced is being dispatched in rake and thus will increase the freight cost borne by the end consumers."
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