New Delhi: Indian Railways has asked the ministry of chemicals and fertilizers to halve the maximum distance up to which it reimburses fertilizer companies for transporting farm nutrients by road.
The railways made this suggestion in an internal note circulated a few weeks back, two fertilizer ministry officials independently said. The note was circulated in response to a draft policy note on fertilizer movement, which is currently being finalized and is slated to be taken up by the Union cabinet soon.
The fertilizer ministry reimburses manufacturers for fertilizers transported by road up to a maximum distance of 500km. The amounts reimbursed vary from state to state and for different fertilizers.
The railways wants this permissible distance to be halved to 250km. Since fertilizers come under the Essential Services Maintenance Act, their movement throughout the country is regulated by the government via the so-called Fertilizer Control Order.
The government is now formalizing a policy to move fertilizers across the country. Under the proposed policy, companies will be given an extra consideration of up to Rs350 per tonne of fertilizers transported by road, with the minimum consideration kept at Rs2,300 per tonne.
Reimbursement for the part of the distance travelled by rail is on actual costs.
Fertilizer ministry officials say that the railways’ demand is significant, since it indicates that the national carrier wants to protect its share of the freight traffic and does not want to lose it to roads.
Both the fertilizer ministry officials said that the ministry will oppose the railways’ move. “We are in the process of writing to the railways on this,” one of the two officials said.
Abhaya Agarwal, lead for public-private partnership (PPP) advisory services at Ernst & Young, said fertilizer manufacturers will not be affected by this move as reimbursement for transport by the railways is based on actual costs. “Railways, however, will have to accompany this with better and more timely availability of rakes for fertilizer traffic,” he added.
Data available with the railway ministry for May show that the quantum of fertilizer traffic carried by the railways declined by more than 21% to 2.64 million tonnes from the year-ago period. Revenue from fertilizer traffic dropped from Rs255.52 crore in May 2011 to Rs253.16 crore in May this year.
The railways’ former financial commissioner R. Sivadasan said, “I cannot say if such a move will benefit the railways, but it is baffling to see a 21% drop in fertilizer traffic in the month of May. May, being just before the arrival of the southwest monsoon, is the peak period of fertilizer traffic for the railways.”
A railways spokesperson did not comment on the matter, and the railways official concerned could not be reached for comment.
An official of the Fertilizer Association of India (FAI), an industry lobby group, said that while the overall long-distance transfer from railways to roads is not appreciable, companies find it easier to use roads for shorter distances up to 500km.
“Availability of railway rakes is a major issue. Often, rakes are not available at short notice and that causes disruptions,” the FAI executive said.