labels: commercial vehicles, industry - general, economy - general, railways
Rail Budget: Impact on commercial vehicles manufacturersnews
24 February 2006

The dynamic freight pricing policy unveiled in this year's Rail Budget is likely to hit the business of commercial vehicle companies. But will that happen?

The proposal for a dynamic freight pricing policy made in this year's Railway Budget is seen as a rearguard action on the part of the railways to retrieve the traffic lost to road transport. What is also seen working in favour of India's largest public undertaking is the recent judgement of the Supreme Court, on the overloading of trucks.

This ruling did lead to a spurt in the demand of commercial vehicles. But now in the wake of the proposed new freight regime, the business of the commercial vehicle companies is likely to be adversely affected.

Cement, steel, coal and oil companies are already celebrating the sops announced by the railways minister on the freight rates front. Till now, these companies have been relying heavily on the road transport for the carriage of their cargo. Their profits took a beating following the Supreme Court ruling. So, with the new freight structure becoming a reality, they are certain to shift to rail transport.

The commercial vehicle companies acknowledge this fact. Says executive director of finance of Ashok Leyland K Sridharan, "There will definitely be an impact on the road transport without doubt." But he believes that for shorter distance like 500 to 600 km, road transport will continue to be relevant. Further, he sounds doubtful regarding the efficacy with which these announcements will be put into action.

He, certainly, has a point there, as this is not the first time that the railways have come up with such policy initiatives. Intent to win back the lost traffic was very much present even in the past budgets. But that failed to translate into action, thanks to the bureaucratic quagmire.

Given this, if the commercial vehicle companies are casting doubts about the implementation of this new freight structure, they cannot be faulted. But if the railways do manage to make it an exception this time round, the commercial vehicle makers will have their task cut out.

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Rail Budget: Impact on commercial vehicles manufacturers