year's Rail Budget does not propose any freight rate hike.
In fact, it has doled out discounts for peak and non-peak
seasons. How this measure will impact cement companies?
Lalu is on a roll. After improving the physical and financial
condition of the railways, Yadav has presented a budget,
which is likely bring cheers from many quarters.
from reducing the passenger fares, a move obviously directed
at the UPA's much touted thrust on bringing relief to
the common man, he has also resisted the temptation for
going in for a freight hike.
In fact, there has been no freight hike across the board.
Further, Lalu's Railway Budget 2006 is full of other such
measures, which are meant to simplify the freight pricing
policy and to lure away road traffic to railway traffic.
For example, 4,000 commodities, which were earlier pressed
under 80 heads, have been compressed under 28 heads. He
has proposed a dynamic freight pricing policy, depending
upon the season. That is, there will be 20 per cent freight
discount for peak season for incremental traffic and 30
per cent discount for non-peak season.
a matter of fact, the cost of carriage for one net km
has been brought down from 61 paise / tonne to 51 paise
/ tonne. Again, it has provided for loyalty discounts
to sectors like cement, iron, cement and oil. The railway
ministry has done this, at a time when it has taken a
decision to merge the DA of its employees with their salaries.
Besides reflecting the railways' financial health, the
policy measures also speak volumes about its determination
to attract more and more traffic.
on cement companies:
The announcements made on the freight rate front has made
the cement sector, already hit by the Supreme Court's
judgement on overloading of trucks, more than happy.
is a good budget for Shree Cement and it will give a boost
to Shree Cement's logistic cost deduction because in the
last ten months of 2005-2206, we were not loading anything
on rail because at that time road was cheaper. But after
restriction on overloading, we started loading in January.
So our base loading is zero. We would be able to get 20
per cent and 30 per cent discount in freight on peak and
non-peak season," says executive director of Shree
Cements M K Singhi.
No doubt, the profit margins of cement companies are expected
to go up following freight savings. But how significant
will these gains be? If analysts are to be believed, the
gains will not be huge. They say that the quantum of profit
for cement companies through freight savings will not
be material for their stock prices as it will affect their
profits by less than half-a-per cent to 1 per cent.
fact, companies like Gateway Distriparks stand to gain
than cement companies from the concessions made by the
railway minister on the freight rates front.