Laloo may hike freight rates to check deficit

There is likelihood of announcement of freight rate hike, as without an increase, the coming Rail Budget will plunge rail finances into deficit.

Unless there is some revision in freight rates, the coming Rail Budget will plunge rail finances into deficit and slow down the railways' onward march.

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Freight accounts for two-thirds of the railways' income and its volume has steadily grown over the past few years. However, freight revenue has remained largely static as the increase in volume was mainly limited to low-income cargo.

In the last fiscal year, there was a shortfall of Rs 800 crore in freight revenue, although the target of carrying 540 million tonnes cargo was exceeded by 10 million tonnes.

For the coming financial year 2004-05, a freight target of 570 million tonnes had been already approved in the January-end interim budget. The target has been further revised to 577 million tonnes.

But the additional load is confined mainly to items that yield little income. Competition from trucks has also been tough. Besides, the expected 20 million tonne-fall in steel production this year could further drive the Railways towards cheaper cargo.

Taken together, they mean that if freight has to continue subsidising passenger travel and earn, its rates must go up.

After taking office, Railway Minister Laloo Prasad Yadav promised the Railways must be pro-poor and pro-people. If fares for low-class travel are not to be raised, there are minimal chances of substantially tinkering with the freight rates.

Also, a major hike in the freight rates can trigger a chain reaction upsetting the common man's budget. Only a marginal rationalisation of freight, therefore, can be said to be in the making. Besides, the passenger traffic has been rising at three per cent and the steady growth indicates the passengers will be spared a hike in fares.

The passengers will be rewarded with better amenities and a Deshdarshan Express for going round pilgrim centres.

The Railways continue to be lucky with the Central powers. While the previous government had launched a massive rail safety fund and kept separate allocations for vital projects nearing completion, the Manmohan government has indicated a higher budgetary allocation to finance new lines.

Last year, the budgetary support was Rs 4,544 crore and it could go up by Rs 2,000 crores in keeping with the CMP's commitment to build up the nation's infrastructure.

Still, the Railways require support from the finance ministry. The Railways' running costs have gone up by Rs 1000 crore due to costlier high-speed diesel engines. Last year, Rs 1400 crores were saved by cutting down wasteful expenditure and Yadav has promised to keep up the show. He has vowed to earn more from scrap that yields Rs 1000 crores annually.