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BW Businessworld

Freight Rates Hike, Risk Of Dwindling Market Share

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The Railway Budget marked a departure from recent past as it was shrewd balance between populism and pragmatism, though overall it lacked an insight to improve railways’ revenues as there was no clear roadmap to augment its capacity and overall rail infrastructure.

No doubt the paradigm shift in freight tariff as from now on it will be fuel-linked freight charge revision, 5 per cent increase in freight rates from 1 April 2013, will generate higher revenues to railways, but it also runs the risk of losing its already dwindling market share to roads and highways.

As far as rail infrastructure is concerned, though land acquisition for the Dedicated Freight Corridor is almost complete, construction contract will only be awarded by end of next fiscal. Also there is no clear mapping as to how the private investment will be utilized for some of the PPP projects announced. While improvement of connectivity to mines is a  welcome step, increase in freight will not only push up steel prices, it will also add to inflationary pressures.

Overall there is hardly any initiative in the Budget that could bring a smile on the faces of either the passengers or the industry.

Dilip Oommen, CEO & MD, Essar Steel India Limited