BANKING on the economic boom to boost earnings, railway minister Lalu Prasad has attempted to deftly marry pragmatism with populism on the freight front to keep India Inc happy without actually giving anything away. The token reduction in freight rates for petrol & diesel (5%), fly ash (14%) and goods destined for the North-East (6%) would not lead to major losses in revenue. While only a small volume of petrol & diesel are moved by rail, the 6% discount for North-East does not apply to all commodities.
A clear message has also been conveyed to the industry not to expect any further reduction in goods tariffs by emphasising that the process of rationalising freight charges is now complete. So, not hiking freight tariffs is the major sop for India Inc. The railways could have opted for a modest hike in goods tariffs keeping in mind the ongoing economic boom and the effect of inflation, which is yet to be tamed.
The shadow of polls is also visible in the promises showered on the industry in terms of better connectivity with ports and sector-specific long-term plans for steel, cement, coal and container business—topped up with the Rs 75,000-crore plan to boost infrastructure for a high-density network. That’s pretty long on promises, and clearly short on give-aways. Since this could be Lalu’s last full-fledged Budget as the UPA’s railway minister, promises such as a seven-year blueprint for infrastructure leave a lot on the plate for the next government to tackle. Lalu has also indicated that railways would foray into door-to-door logistics, increasing competition in this sector. The industry has been responding positively to such initiatives and there is a demand for transporting all commodities on private goods trains. “Private freight operators should be allowed to transport all commodities instead of a listed few—which is hampering the growth of private operators and their investments,” said Federation of Indian Export Organisations (Fieo) president Ganesh Kumar Gupta. The move to improve connectivity to ports would help exporters, and the Railway Budget 2008 holds several promises since it is investment-oriented, he added.
For 2008-09, freight target has been fixed at 850 million tonnes, just 60 tonnes more than the current fiscal’s target of 790 million tonnes. Considering that the increase in freight loading during the current fiscal is estimated at 62 million tonnes, the railway minister seems to have gone for a rather modest target. This could be due to the realisation that utilisation of assets cannot be stretched much now. Even the incremental loading of 42 million tonnes during the first nine months of the current fiscal has not been found to be enough inspiration to fix a more ambitious target.
It is estimated that railways would earn much more from movement of foodgrain and fertiliser compared to earnings of Rs 3,300 crore and Rs 1,700 crore, respectively, in the recent past.