India Railways freight customers may get fixed rate contracts

20 February 2017

Transporting goods by train may soon get cheaper as the railways ministry is looking to launch special freight schemes with attractive long-term contracts for its customers as well as discounts on incremental freight loading.

Several other usage charges will be waived for key customers as part of the plan, officials said. “All costumers transporting through railways will get a price predictability that the logistics cost won’t go up for the next three years. In the last two years our freight for different sectors has gone up by over 20%. So, this will help customers save on the logistics cost,” said a senior ministry official, who did not wish to be identified.

As per the plan, railways will offer three-year contracts to its customers with fixed freight rates during the period, along with discounts of up to 15% for incremental loading.

“Suppose a cement company was transporting 10 million tonnes through railways. If the company does 20 MT this, year we’ll offer it a 10% discount on that incremental loading,” the official said. The move will help railways retain its bulk consumers and consolidate its dominant share in freight transportation, the segment in which the state-run carrier is losing ground.

Freight accounts for almost 65% of total revenues of railways and helps it cross-subsidise passenger segment. Indian Railways expects to earn revenue of Rs 1.18 lakh crore from freight loading in 2017-18. The loading target has been set at 1,165 MT, which is 70 MT more than that for the current fiscal.

The planned incentives will effectively bring down transportation cost for commodities such as steel, cement, fertilizers, food grain and automobile, among other commodities, the official said. This policy will cover all commodities excluding coal. “We have not done it for coal because we have loaded 23 MT more coal this year than what we did last year,” the official said.

The Railway Board’s member traffic Mohd Jamshed had recently told ET about the freight sector reforms being undertaken by the ministry. “We are taking a large number of course correction measures to retain our share,” Jamshed had said. “We now have timetabled freight trains offering more predictability to customers.

Source – ET