It's no longer a slowdown; it's a contraction.
The global meltdown has finally hit the freight earnings of Indian Railways. Freight revenue, which laid the roadmap for
the success story in terms of high profitability of Indian Railways for the past four years, has seen a fall in the month of October.
The situation has turned alarming a senior Railway official told Hindustan Times. "Everybody in the Indian Railways is on alert."
Freight volumes have contracted by 3 per cent, from 67 million tonnes in October 2007 to 65 million tonnes in October 2008, the official said. Earnings growth, however, showed a timid rise of 2 per cent.
October, in fact, has been the turning point, as the first half of the current fiscal, from March to September 2008 saw earnings growth at 19 per cent, much above the targeted 10 per cent.
Much of this drop has come from a crash in the iron ore export traffic, which has fallen by 70 per cent. Iron ore, which had been riding a commodity boom over the past three years, helped the Railways make substantial surpluses.
"In the last year we had increased the iron ore freight rates by 110 per cent and we could do so because there was money," the official said. So even if iron ore comprised only 3 per cent of the total traffic by volumes, it added 13 per cent to total earnings.
"The miners didn't mind paying as they were minting money," the official said. "We joined the party with higher freight charges."
But as demand has slowed and the prices of iron ore have fallen to almost a third, all of a sudden the party seems to be over. "We have offered them a discount of 50 per cent," the official said.
If October was the turning point, the first 10 days of November confirm the downward trend. Freight earnings from steel are down by 20 per cent. "This is very unusual," the official said.