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Trivedi resurrected: Freight rates linked to input fuel prices

Railway minister Pawan Kumar Bansal on Tuesday used his very first budget itself to bring to life a politically sensitive revenue-raising proposal first introduced by former Railway minister Dinesh Trivedi, which had been scrapped by his successor Mukul Roy days after its announcement. Soon after presenting the railway budget in 2012, Trivedi had to resign as West Bengal Chief Minister Mamata Banerjee, chief of the Trinamool Congress which was then a constituent of the UPA government, wanted him out of the Cabinet. She was upset with Trivedi as ‘his’ railway budget deviated sharply from the Trinamool Congress’s stated policy thrusts.

In that ill-fated railway budget, Trivedi had announced the concept of Fuel Adjustment Component (FAC), a mechanism that links railway freight rates to input fuel charges. Bansal has introduced this system but revised it to ensure that companies and organisations that use train transport do not suffer frequent and uncertain fluctuations in rail freight rates.

Under his revised proposal, a freight rate increase or decrease due to the FAC will be made only twice a year and not repeatedly in response to petro- product price changes by the oil marketing companies (OMCs). ‘This will ensure that freight rate hikes forced by input fuel price changes are dynamic and change in either direction just twice a year,’ said Bansal. The minister, who received praise from the private corporate sector, both Indian and foreign, for this step, admited that this is quite likely to result in an upward revision of freight tariff, effective from 1 April, by 5 per cent.
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