Lalu belies expectation; leaves Freight rates unchanged

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Railway Minister, Lalu Prasad Yadav presented Railway Budget 2007 in the Parliament today. He informed that the railways have made a healthy profit of Rs 20,000 crore versus Rs 14700 crore of the previous year.

While, a cut in freight rates was widely expected, Lalu decided to keep them untouched, however he has administered a few re-classifications.

Freight rates on petrol and diesel will be cut by 5%. Also, freight rates on iron ore have been cut by 6%.

Oil marketing companies are definitely expected to benefit from this news. Director Finance at IOC, SV Narasimhan said that a 5% reduction in freight rates would translate into a Rs 35-40 crore cut in their under-realizations. "On a full year basis our under-realization would be reduced by Rs 40 crore. Since our freight volume on rail is about 30%," he said.  

Lalu informed that there has been a quantum jump in the freight business and the incremental loading this year is likely to be about 60 MT. "To maintain this rate of growth, we have on the one hand, taken several steps to improve the availability of trains and on the other, have adapted our policies to the needs of the market and customers," said Lalu Yadav during his address to the Lok Sabha.

He further said that they have decided to develop all basic facilities at freight terminals handling more than 15 rakes per month, over the next three years. Plans on upgradation of freight terminals is also underway.

The dedicated freight corridor costing Rs 30,000 crore is expected to speed-up passenger as well as freight travel. Lalu said that the freight corridor will resolve network problems of goods carriers.

Companies like India Cements and Essar Steel that were expecting a cut in freight rates would have been impacted positively if the rates were decreased. However, the story would have been a bit different for Transport Corporation of India, TCI, if rates were decreased.

ED at TCI, Vineet Aggarwal says, "At this point in time, I do not expect a major impact of the freight rates but definitely the Railway should do a lot to augment the capacity as well as increase a rotation of the wagons, so that they are available faster and the rate can come down eventually."

So it seems that the Railway Minister has taken a neutral position and not played around too much with the freight rates.

- Sakshi Sharma (with inputs from CNBC-TV18)