Large steel makers such as Tata Steel, Jindal, RINL and SAIL would soon get 'favoured customer' treatment from Indian Railways. In an attempt to promote bulk freight movement on its network, the Railways is introducing a new "freight load preference policy" for steel players fighting inflationary pressures due to spurt in iron ore prices. According to the policy, companies providing round-the-year-business (to and fro) to the Railways would be given preference in grant of increased quantity of rakes and offered discounts on freight.
The policy is aimed at addressing the issue of shortage of rakes by rationalising the allocation process. While the move will benefit large steel firms with higher loading requirements, it may face criticism from smaller players having irregular loading needs.
Under the policy, the Railways would enter into long-term strategic tie-ups exclusively for on-time movement of iron ore. Failure on the part of the Railways to deliver rakes to the companies on time would attract penalties. Failure by the companies in using a specified number of wagons would attract similar penalties that could even result in Railways disregarding their demand for higher rakes in other cargo.
Such agreement would also require companies to provide some business to railways on return journeys on a continuous basis to get preference in rake allotment. Railways would have to compensate customers for a delay in providing freight services while users would have to pay a fine if they are not able to provide the promised load. Companies would be able to save quite a bit through the new policy as they would get discounts irrespective of (peak or lean) season.
The Railways has taken many steps to help steel makers in recent days. It brought down iron ore from class 180 to class 170, thus effecting a freight cut by 5%. It also removed the port congestion surcharge of 30% levied on domestic movement of iron ore. The Railways transported 53.59 million tonnes of iron ore for exports in 2007-08, according to provisional data collated by the railway board, 37.9% more than the 38.84 million tonnes transported in the previous year.
The policy is aimed at addressing the issue of shortage of rakes by rationalising the allocation process. While the move will benefit large steel firms with higher loading requirements, it may face criticism from smaller players having irregular loading needs.
Under the policy, the Railways would enter into long-term strategic tie-ups exclusively for on-time movement of iron ore. Failure on the part of the Railways to deliver rakes to the companies on time would attract penalties. Failure by the companies in using a specified number of wagons would attract similar penalties that could even result in Railways disregarding their demand for higher rakes in other cargo.
Such agreement would also require companies to provide some business to railways on return journeys on a continuous basis to get preference in rake allotment. Railways would have to compensate customers for a delay in providing freight services while users would have to pay a fine if they are not able to provide the promised load. Companies would be able to save quite a bit through the new policy as they would get discounts irrespective of (peak or lean) season.
The Railways has taken many steps to help steel makers in recent days. It brought down iron ore from class 180 to class 170, thus effecting a freight cut by 5%. It also removed the port congestion surcharge of 30% levied on domestic movement of iron ore. The Railways transported 53.59 million tonnes of iron ore for exports in 2007-08, according to provisional data collated by the railway board, 37.9% more than the 38.84 million tonnes transported in the previous year.