‘Soft’ rail budget very harsh on prices
27 Feb 2013 7:21 AM IST
Over 5 per cent increase in railway freight on all major commodities like foodgrains, petroleum products and fertiliser will fuel inflationary pressure, say economists.
'Definitely there will be some increase in transportation cost...transportation costs for heavy industries like coal and cement will rise by at least 0.5 per cent. Besides, inflation will also increase by 0.25 per cent,' Chief Economist at RPG Foundation Pai Panandiker said.
Wholesale Price Index (WPI) based inflation declined to 6.62 per cent in January, however, retail inflation remained in double digits at 10.79 per cent during the month.
Commenting on hike in freight charges, Brinda Jagirdar, chief economist from SBI, said the increase was inevitable in the face of rising fiscal deficit, however, it will keep inflation elevated.
'We have to look beyond inflation. There is pressure on the economy because of rising fiscal deficit. Growth is more important. I agree its a hard step, but it will increase the amenities, and improve safety. The hike was inevitable. It will certainly keep inflation elevated, but marginally,' Jagirdar said.
Railway Minister Pawan Kumar Bansal in the rail budget for 2013-14 proposed hiking basic freight rates by over 5 per cent on commodities such as grains and pulses, coal, iron and steel, urea, iron ore, cement, pig iron, high speed diesel oil, groundnut oil, kerosene and liquefied petroleum gas.Chief Economist from Crisil DK Joshi said, 'It will add to inflation but cannot have spillover effect because the demand is weak.'
Impact on inflation will also depend on how much the burden is passed on to customers, economist from Standard Chartered Bank, Anubhuti Sahay, said. 'Obviously it will have impact on overall inflationary environment. It will also depend how much the burden will be passed on to customers. An increase of 5 per cent in freight charges will increase inflation by 0.7-0.8 per cent. Rest will depend on how much increase will be there in coal prices over a period of time,' Sahay said.
PwC, Capital Projects and Infrastructure, Executive Director, Manish Agarwal said though higher freight rates will impact inflation, but it will be marginal. 'Undoubtedly, it will have some impact but I don't think it will be very significant. The reason being a fair part of transportation is done through roads and hike in diesel price has already been factored in...'On coal, there will be an impact because it is not transported through roads. Rise in coal prices will make electricity cost higher for power producers. A five per cent increase in transport cost could raise electricity prices by about 0.3-0.5 per cent, but the timing of the pass through in end-tariffs would depend on the electricity regulations, Agarwal said.'
5.8% RISE IN ENERGY TRANSPORT PRICES SET TO FUEL ALREADY OUT-OF-CONTROL INFLATION FIRE
Railways on Tuesday hiked freight rates for moving diesel and cooking fuels by almost 8 per cent, a move that may result in marginal hike in retail fuel prices.
Freight on diesel was increased by 5.79 per cent to Rs 1,041.80 per tonne from Rs 984.80 a tonne currently. The same on kerosene went up by 5.79 per cent from Rs 886.30 per tonne to Rs 937.60 a tonne and that on liquified petroleum gas (LPG) by 5.79 per cent to Rs 937.60 a tonne.
The rates exclude development charge and busy season charges which essentially means that actual hike for oil companies would be higher, according to the Railway Budget for 2013-14 presented in Parliament by Railway Minister P K Bansal.
Oil companies transport over about 32-33 per cent of diesel, LPG and kerosene through railways and the hike in freight will either have to be passed on to consumers or have to be accounted as under-recoveries which the government would compensate from the General Budget.
Sources said it was unlikely that the government, which is hard pressed for finances, would agree to taking on additional burden and the freight increase is likely to be passed on to consumers.
The increase in retail rates of diesel, LPG and kerosene that is needed because of the freight increase is yet to be calculated.
Bansal said the increase in diesel prices last month had added Rs 3,330 crore to Railway's fuel bill. Also, adding to its burden, is electricity tariffs that are revised periodically.
'The increase in fuel bill during 2013-14 on account of these revisions would be more than Rs 5,100 crore,' he said while proposing an across-the-board increase in freight charges of over 5 per cent.
COAL FREIGHT RATE UP 5.7%, TO PUSH UP POWER TARIFFS
The proposed increase in coal freight rate by 5.7 per cent in the Railway Budget 2013-14 on Tuesday will have no effect on the coal sector but may lead to a marginal increase in the electricity tariffs.
Railways Minister Pawan Kumar Bansal sought to increase the freight rate on coal from Rs 685.10 per tonne, to Rs 724.80 , a hike of 5.79 per cent.
Coal India Ltd (CIL) Chairman and Managing Director S Narsing Rao said: ‘Coal sector, including Coal India will have no effect due to increase in coal freight charges. However, the increase will borne by power generating companies and might lead to increase in electricity chargers.’ He also said the increase may lead to higher landing cost for generating companies by up to 3 per cent. According to industry analyst the hike in coal freight charges will be neutral to coal sector but will hit downstream sector using coal such as power, cement and steel.
'The increase in freight charges would increase electricity tariff by less than one per cent as freight is very small component of overall cost of electricity,' Kuljit Singh Partner Ernst & Young said.Bansal also said that the recently revamped participative policy enabling partnership with large mines, industry and investors addresses the specific concerns of private investors.An investment of up to Rs 9,000 crore is expected under these projects including Rs 4,000 crore for coal mine connectivity. Analysts welcomed it saying that lot of problems were being faced by coal companies in offtake from these mines.
'This is a good step and it would help in more evacuation of coal,' Singh said.The average daily rake loading last month by CIL, which accounts for 80 per cent of domestic coal production, was 210 rakes as against 185 rakes in January last year.
'Definitely there will be some increase in transportation cost...transportation costs for heavy industries like coal and cement will rise by at least 0.5 per cent. Besides, inflation will also increase by 0.25 per cent,' Chief Economist at RPG Foundation Pai Panandiker said.
Wholesale Price Index (WPI) based inflation declined to 6.62 per cent in January, however, retail inflation remained in double digits at 10.79 per cent during the month.
Commenting on hike in freight charges, Brinda Jagirdar, chief economist from SBI, said the increase was inevitable in the face of rising fiscal deficit, however, it will keep inflation elevated.
'We have to look beyond inflation. There is pressure on the economy because of rising fiscal deficit. Growth is more important. I agree its a hard step, but it will increase the amenities, and improve safety. The hike was inevitable. It will certainly keep inflation elevated, but marginally,' Jagirdar said.
Railway Minister Pawan Kumar Bansal in the rail budget for 2013-14 proposed hiking basic freight rates by over 5 per cent on commodities such as grains and pulses, coal, iron and steel, urea, iron ore, cement, pig iron, high speed diesel oil, groundnut oil, kerosene and liquefied petroleum gas.Chief Economist from Crisil DK Joshi said, 'It will add to inflation but cannot have spillover effect because the demand is weak.'
Impact on inflation will also depend on how much the burden is passed on to customers, economist from Standard Chartered Bank, Anubhuti Sahay, said. 'Obviously it will have impact on overall inflationary environment. It will also depend how much the burden will be passed on to customers. An increase of 5 per cent in freight charges will increase inflation by 0.7-0.8 per cent. Rest will depend on how much increase will be there in coal prices over a period of time,' Sahay said.
PwC, Capital Projects and Infrastructure, Executive Director, Manish Agarwal said though higher freight rates will impact inflation, but it will be marginal. 'Undoubtedly, it will have some impact but I don't think it will be very significant. The reason being a fair part of transportation is done through roads and hike in diesel price has already been factored in...'On coal, there will be an impact because it is not transported through roads. Rise in coal prices will make electricity cost higher for power producers. A five per cent increase in transport cost could raise electricity prices by about 0.3-0.5 per cent, but the timing of the pass through in end-tariffs would depend on the electricity regulations, Agarwal said.'
5.8% RISE IN ENERGY TRANSPORT PRICES SET TO FUEL ALREADY OUT-OF-CONTROL INFLATION FIRE
Railways on Tuesday hiked freight rates for moving diesel and cooking fuels by almost 8 per cent, a move that may result in marginal hike in retail fuel prices.
Freight on diesel was increased by 5.79 per cent to Rs 1,041.80 per tonne from Rs 984.80 a tonne currently. The same on kerosene went up by 5.79 per cent from Rs 886.30 per tonne to Rs 937.60 a tonne and that on liquified petroleum gas (LPG) by 5.79 per cent to Rs 937.60 a tonne.
The rates exclude development charge and busy season charges which essentially means that actual hike for oil companies would be higher, according to the Railway Budget for 2013-14 presented in Parliament by Railway Minister P K Bansal.
Oil companies transport over about 32-33 per cent of diesel, LPG and kerosene through railways and the hike in freight will either have to be passed on to consumers or have to be accounted as under-recoveries which the government would compensate from the General Budget.
Sources said it was unlikely that the government, which is hard pressed for finances, would agree to taking on additional burden and the freight increase is likely to be passed on to consumers.
The increase in retail rates of diesel, LPG and kerosene that is needed because of the freight increase is yet to be calculated.
Bansal said the increase in diesel prices last month had added Rs 3,330 crore to Railway's fuel bill. Also, adding to its burden, is electricity tariffs that are revised periodically.
'The increase in fuel bill during 2013-14 on account of these revisions would be more than Rs 5,100 crore,' he said while proposing an across-the-board increase in freight charges of over 5 per cent.
COAL FREIGHT RATE UP 5.7%, TO PUSH UP POWER TARIFFS
The proposed increase in coal freight rate by 5.7 per cent in the Railway Budget 2013-14 on Tuesday will have no effect on the coal sector but may lead to a marginal increase in the electricity tariffs.
Railways Minister Pawan Kumar Bansal sought to increase the freight rate on coal from Rs 685.10 per tonne, to Rs 724.80 , a hike of 5.79 per cent.
Coal India Ltd (CIL) Chairman and Managing Director S Narsing Rao said: ‘Coal sector, including Coal India will have no effect due to increase in coal freight charges. However, the increase will borne by power generating companies and might lead to increase in electricity chargers.’ He also said the increase may lead to higher landing cost for generating companies by up to 3 per cent. According to industry analyst the hike in coal freight charges will be neutral to coal sector but will hit downstream sector using coal such as power, cement and steel.
'The increase in freight charges would increase electricity tariff by less than one per cent as freight is very small component of overall cost of electricity,' Kuljit Singh Partner Ernst & Young said.Bansal also said that the recently revamped participative policy enabling partnership with large mines, industry and investors addresses the specific concerns of private investors.An investment of up to Rs 9,000 crore is expected under these projects including Rs 4,000 crore for coal mine connectivity. Analysts welcomed it saying that lot of problems were being faced by coal companies in offtake from these mines.
'This is a good step and it would help in more evacuation of coal,' Singh said.The average daily rake loading last month by CIL, which accounts for 80 per cent of domestic coal production, was 210 rakes as against 185 rakes in January last year.
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