Indian Railways on Monday hiked the freight rates for cement, coal and coke by up to 8% per tonne. The Railways move would increase the input cost of housing, power and steel sectors that have been identified for special focus by the government. The hike came into effect immediately after the government announced a package to boost the economy.
According to a Railways notification, the classification of cement, coal and coke has moved upwards from class 140 to 150 for train load movement. This translates into higher freight depending on the distance travelled. Coal industry analysts suggest that the increase in freight will hit power generators hard, while for steel producers the increase will be offset by a global decline in coking coal prices. The coking coal is converted into coke for use in the blast furnace for generating liquid steel.
“Cost of thermal coal is less than the transportation cost for state power generators in the northern region, where coal may be transported from about 1,000 to 1,500 kms. Railways freight on coal, typically, costs about Re 1 per tonne per km, which can result up to Rs 1,500, whereas cost of coal is between Rs 500 and 750 (Grade F) thermal coal,” Puneet Goel of KPMG advisory services told ET.For cement industry, the move could lead to an average around Re 1 per bag increase in transportation cost of the construction material, thinning the relief to cement consumers that could result from 4% excise duty cut.
