Rail freight rates for most commodities to go up from 1 October

Rail freight rates of all commodities, except containers and automobiles, is set to go up as the Railways have decided to levy 15 per cent additional busy season charge on all commodities from 1 October.

The busy season charge of 15 per cent on almost all commodities will remain in force from October 2013 to June 2014, according to a notification issued by the Railways.

However, container and automobile traffic will be exempt from the busy season freight surcharge, the notification added.

Indian Railways' decision to increase busy season surcharge on freight rates by 300 basis points from 12 per cent to 15 per cent will drive up prices of key commodities like coal, iron and steel, cement, petroleum products and foodgrains.

This in turn will have an inflationary impact across a spectrum of essential intermediates and finally on consumer products if producers decide to pass on the burden.

The impact will be more on prices of agricultural commodities and inputs such as foodgrains, flours and pulses and chemical fertilisers where the busy season surcharge has gone up by an even higher rate of 500 bps – from 10 per cent to 15 per cent.

The proposed hike in freight rates at a time when the inflation rate has shown an upward trend, increasing from 5.79 per cent in July to 6.1 per cent in August, is expected to stoke inflationary pressures.

It is also not known whether the proposed hike has factored in the likely effect of the review of fuel adjustment component, also due on 1 October.

Indian Railways levies a surcharge on freight traffic during the entire year except three months of the lean season from July to September.