Railways plans to lower cost of goods transport

Transporting goods by train may get cheaper, with the railways planning to offer special rates for bulk consumers who will give the national transporter assured freight traffic on advance payment. In return, the railways will offer a 5-10% reduction in base charges, fixed prices over the financial year and preferential allotment of rakes.

Power plants that use coal, among other bulk users, can benefit from this scheme. The planned incentives will effectively lower transportation costs for commodities such as coal, steel, cement, fertilisers, food grain and automobiles.

NTPC, the country’s biggest power generator, is set to be the first customer of this special offering. The state-owned corporation will pay Rs 5,000 crore to the railways as advance freight charges for the next financial year. In return, NTPC will get a 10% reduction in freight charges, fixed rates and availability of rakes throughout the year. A memorandum of understanding between the railways and NTPC will be signed soon.

“These long-term contracts will help us grow at a faster pace and we’ll also be able to utilise our assets more efficiently. Bulk consumers in return would get unmatchable rates,” a top rail ministry official said.

The railways is trying to regain share in freight transportation that it lost to roads. The Indian Railways, which had about 70% share in freight movement in the country after Independence, now has a 33% share.

As part of the special freight rate offering, other charges will be waived for key customers, the official said. Freight accounts for almost 65% of the revenue of the railways and helps to subsidise passenger fares. Indian Railways expects revenue of Rs 1.18 lakh crore from freight in the current financial year from carrying 1,165 million tonnes of commodities. For the next financial year, the railways has set a freight earnings target of Rs 1.22 lakh crore from transporting 1,216 million tonnes of goods.

Source: THE ECONOMIC TIMES