India Inc welcomes Railways’ discount scheme

20 Mar 2017

India Inc is upbeat about the Indian Railways’ plan to have long-term tariff contracts with consumers in cement, steel and fertiliser sectors, with many companies now willing to bring in more freight traffic to the national transporter.

Companies such as UltraTech Cement and ACC and industry body Cement Manufacturers’ Association (CMA) are already in talks with the railways to enter into long-term contracts. The new plan is likely to bring back the traffic the railways lost in the recent years. It is expecting an increase of six per cent in its freight traffic to 1,165 million tonne (mt) in 2017-18, compared with 1,093.5 mt in FY17. Over a period of 60 years, the share of railways on total freight traffic has declined from 89 per cent to 30 per cent, with the majority of the traffic moving towards the road sector.

Pushed by long-term contracts, the segments in which the railways is expecting a major rise in traffic in FY18 include container services (9.9 per cent), pig iron and finished steel (7.52 per cent), coal (6.7 per cent) and iron ore (6.7 per cent). “This (the discount scheme) is a clear effort from the railways to bring back its lost traffic. As of now, about 65 per cent of cement sector traffic is through road and 30 per cent is through rail route, while the remaining five per cent is by water. The new incentives offered may help the cement sector and will bring in additional traffic to railways,” said a CMA official who did not want to be named.

The railways is targeting 113 mt traffic from the cement sector following the new scheme. The national carrier had set a target of 110 mt for FY17, but due to decline in infrastructure activities because of demonetisation, it is expected to be in the range of only 90-100 mt. While coal constitutes 45 per cent of the railways’ freight traffic share, cement makes up eight per cent, while foodgrain and steel constitute seven per cent each. According to the Revised Estimates for 2016-17, revenue from freight traffic will be Rs 1,08,900 crore. The railways expects it to rise by 8.5 per cent to Rs 1,18,157 crore in FY18, primarily through an increase in cargo volumes. Freight loading is expected to fall marginally to 1,093.5 mt in FY17 from 1,095 mt in FY16.

Source – business-standard.com