Indian Railways lowers iron ore freight charges for domestic use

June 10, 2008

June 10th (Steel Guru) – Indian Railways has again brought about an adjustment in the classification of iron ore, third such exercise since the railway minister placed Rail Budget for 2008-09. As a result, genuine domestic consumers of iron ore such as producers of pig iron, sponge iron and steel will benefit while the traders, catering to either domestic or export market, will be hit.

The integrated steel plants as well as secondary steel producers, all genuine consumers of ore, will henceforth not only pay a lower freight as per 170 classification as against 180 so far but will also have an assured supply of the ore; while iron ore transportation for other than genuine domestic consumption may become somewhat uncertain as it will attract a much higher rail freight at 200X classification.

So far 200 was the highest classification for the purpose of fixing freight in the Indian Railways. 200X thus becomes the latest, also the highest, addition to the classification list.

With the introduction of 200X classification, Indian Railways has abolished congestion charges so far levied on iron ore traffic booked to sidings and good sheds serving ports and accordingly the zonal railways have been asked not to notify the list of terminals as serving ports. However, the congestion surcharge at 20% on iron ore traffic booked to Pakistan and Bangladesh will continue till March 31st 2009.

In order to avail themselves of the concessional rail tariff, the integrated steel plants and secondary steel producers having their own private sidings for handling inward rakes will be required to submit to the respective zonal railway certified copies of Industrial Entrepreneur Memorandum, the Factory License, Certification of Registration under Contract Labor Act, Consent for Establishment, Consent for Operation from the Pollution Control Board, Central Excise registration certificate and monthly excise return.

According to estimate, the rail transportation cost of transporting iron ore from Barajamda to Haldia dock will increase to INR 1,256 from the present INR 981 a tonne, from Barbil to Paradip port to INR 2,015 from INR 1,568 per tonne and from Dongaposi to Visakhapatnam port from INR 2,397 to INR 3,086 per tonne.

Equally, if not more, affected will be a section of domestic ore traders, particularly those who have assured allotment of 6 rakes a month under the Wagon Investment Scheme. Riding high on the assured rake allotment, these traders entered into ore supply arrangements with many secondary steel producers having little access to ore mines and thus charged fancy premium on the supplies made. For these traders, the rail freight now will become prohibitive.

The secondary steel producers, accounting for an estimated 40% of India’s production and so far complaining of the shortage of ore due to non-availability of rakes, are jubilant over the present decision of the Railways as it will guarantee availability of ore to them at a lower price than before.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: