labels: industry - general, logistics, economy - general, railways
Logistics firms give thumbs-up to Rail Budgetnews
24 February 2006

Lalu Prasad Yadav's Railway Budget announcement will definitely win him applauds, at least from logistics companies, after he announced a number of cuts and discounts for freight rates. The new freight corridor announced in the Budget, is expected to increase the freight movement by 25 per cent.

Lalu announced unto 30 per cent discount on non-peak incremental freight, while there will be a 20 per cent freight discount during the peak season, which certainly seems to be a move to grab business. But, the key point here would be whether traffic can actually shift, because due to the recent Supreme Court ruling on overloading of trucks, road traffic has dealt a little bit of a crippling blow. So, if there is a little spill over of traffic over to railways, then the incremental revenues can possibly accrue to companies like BEML, Gateway Distriparks or Kalindee.

As S K Hazra, MD, Aegis Logistics puts it, "As far as chemicals are concerned, this rider will not help. But to petroleum products, especially to the oil companies, it maybe of some help. But it is always difficult to get a liquid return freight."

Hazra says, "As far as the solids and container movement is concerned, it will help the industry because these containers can have a flexibility of having different types of products on the way back."

Another announcement made by the railway minister was 8 per cent cut in diesel and gasoline freight rates. Lalu also announced 668 million tonnes as the revised freight target for FY07, which seems to be quite creditable, because last year Railways carried an incremental freight of 43 million tonnes, which was an all-time high and this time they have exceeded even that record
and it is 66 million tonnes, more than they have done and next year they have set a higher target of 58 million tonnes cargo.

But will the road freight rates see a similar trend to compete with the railways?
D P Agarwal, vice chairman and managing director of Transport Corporation of India denies this. He says, "We are already too competitive and so many times there was an increase in diesel prices. As we move on to road, it takes double time than railways. So we can't just drop any

But someone's loss is someone's gain.

Chairman and director at Kalindee Rail Nirman, R D Sharma believes it was a good budget. "My company has definitely benefited because we are the pioneers in this field and we are doing very well. So we will definitely benefit by getting more projects," he says.

For incremental loading, extra loading, there will be a discount, it was 15 per cent last year and this year it is has been increased to 20 per cent. The loading target for FY07 is set at 726mt.

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Logistics firms give thumbs-up to Rail Budget