Railways hikes freight rates by 6%

Inflation is likely to shoot further as railways has announced a 6% hike on its freight charges for all commodities to meet the growing financial burden that the state-run transporter is facing due to rising operating cost.

The hike will have a cascading effect on prices. And, will certainly hit the aam aadmi, bearing the brunt of rising food inflation, hard.

With increase in transportation cost of commodities like foodgrains, coal, fertilizer and iron ore, traders will pass on the burden to the consumers.

The circular, issued by the Railway Board, shows that freight prices of all commodities have been revised from existing 7% to 10% as busy season charge on the base freight rate.

The hike, which comes into effect from Saturday, follows an increase in freight charges levied in March. The busy season charge will be levied on all commodities except containerized cargo and certain automobile traffic, and is likely to continue till June 30, 2012. The poor financial condition and rising operating cost has forced railways to amend its earlier decision taken in March.

In March, railways had levied a busy season charge of 5% on coke and coke group and 7% on all other commodities between October 2011 and March 2012. Now, the rates have been revised to 10%.

Under the dynamic pricing policy, railways has increased development surcharge on all goods tariff from 2% to 5%. The hike, which came after four years, will be levied on normal tariff rate.

Rail officials have defended the move, arguing that operating cost has increased due to rise in prices of oil, steel and employees' salaries by 15%-20%. Railways, they claimed, is passing a partial burden of the increasing operation cost, while the rest is being met by increasing efficiency and productivity.

An official pegged the burden on the industry between Rs 1,200 crore and Rs 1,500 crore.