Railway freight Railway ups freights sharply – cement to be most hit:: EMKAY pdf link

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Railway freight Railway ups freights sharply – cement to be most hit Indian Railways raises freight rates across product categories The Ministry of Railways raised the freight rates (for train loads) by on an average 20-32% with effect from March 06, 2012, driven by clubbing of various distance categories (from 179 to 37) and also clubbing certain classes of goods. While for all the other commodities the increases will be upto 27%, for fertilisers and food grains, the increase in the freight will be to the tune of 30-33% due to change in the classes of goods Impact higher for fertilizers and foodgrains but it will affect subsidies While fertilizers and food grains were earlier part of class 130A category, they have been merged with class 130 resulting in additional 3-6% additional increase in the freight costs. For all other products, the costs upto 1000kms distance will go up by ~22.5% and above 1000kms will go up by 25%. However, we do not see any impact on fertilizers industry as the freight costs are 100% pass through in subsidies. Also, in case of foodgrains it will largely affect Food Corporation of India. And hence, both these are likely result in subsidies moving higher by Rs14bn. Iron ore for exports to see lower freight costs However, one category which will see reduction in freight is iron ores (meant for exports). The iron ores (meant for exports) have been moved from class 200 to a lower class 160 resulting in about 4% reduction in freight cost Second effective railway freight increase in last 4 months In order to get its deteriorating financials in place, the Indian railways have been looking to raise effective freight charges in absence of any increase in passenger charges. In Oct 2011 the railways had increased the busy season charge from 7% to 10% and development surcharge from 2% to 5%. This had meant an effective 6% increase in railway freight charges. Railway budget may be a non-event The raising of freights just a week before the announcement of Railway Budget 2012-13 (and before the parliamentary session begins) probably shows the non-confrontationist attitude of the government and also reflects that the railway budget may turn out to be a non-event, Railways to benefit by Rs150bn The highest impact of the hike will be on coal movement which contributes about 75% of the total goods transported by Railways. In terms of profitability, however, cement will be most hit with 4-7.5% impact on EBIDTA. The average kilometer per tonne for good transported by Indian Railways comes at 661kms, the category for which the freight hike works out to 23.3%. Hence, we estimate that the freight rate hike would result in Rs150bn for the Indian Railway.hHHmfemgesgsdzg Click here to read report: Event Update