labels: Economy - general
Railways reduces freight rates on oil traffic by 5 per cent news
26 February 2008

Railway minister Lalu Prasad Yadav has announced further cut in rail freight rates for moving petrol and diesel, while presenting Railway Budget for 2008-09 in Lok Sabha. Following this cent cut, the railways hope to wean the petroleum cargo transport business away from roads. 

The rate cut would result in the cost of moving moving petrol and diesel over a distance of 100 km coming down to Rs172.40 per ton instead of Rs181 currently
 
The rate for moving the auto fuels over 1,000km would cost Rs1,184.40 per ton as against Rs1,243.60 a ton currently while doing the same over a distance of 2,000 km would cost Rs2,131.80 per ton as opposed to Rs 2,238.40.

The move would help oil firms save merely Rs50 crore as less than 40 per cent of the petrol and diesel consumed in the country is moved on rails. As a result the relief is unlikely to result in cut in fuel prices.

Oil firms move over 40 per cent of the annual consumption of of the 54 million tons of petrol and diesel through pipelines, which is the cheapest mode for fuel movement, and 35-40 per cent by rail and the balance 20 per cent movement is by road. 
 
The price build-up of petrol and diesel factors is a notional 50 per cent of the prevailing rail freight. The five per cent cut in rail freight will therefore not have an impact on the price build-up as the new freight charge would continue to be higher than what is accounted for in the price build-up, a government official said.

Oil companies currently make a loss of Rs6-Rs7 a litre on the sale of the two fuels owing to the cap on retail prices.

Yadav said "During the last four years, we have rationalised the freight structure extensively to make it simple and transparent. Earlier, we had announced that, barring some light commodities, the difference in the highest rates and the lowest rates would not be more than two times. Accordingly, we had reduced the freight rates for petrol and diesel by more than 12 per cent during the last two years by reducing its classification from Class-240 to Class-210. Now, concluding this process of rationalisation, we have decided to reduce the highest class from Class-210 to Class-200."

The rationalisation of freight tariff has now been completed and barring few light commodities, the difference between the highest and the lowest rates is not more than two times, he added.


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Railways reduces freight rates on oil traffic by 5 per cent