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Moneylife » Companies & Sectors » Sector Trends » Railways to face a hit of Rs2,700 crore a year on account of diesel hike

Railways to face a hit of Rs2,700 crore a year on account of diesel hike

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MDT/PTI | 18/01/2013 06:04 PM | 

The diesel hike comes at a time when the Railways is facing an acute financial crunch. Earnings from passengers and freight have failed to meet the target in the current fiscal


New Delhi: The diesel price hike has put an additional burden of around Rs2,700 crore a year on the cash- strapped Indian Railways, reports PTI quoting a senior official.


“We have to pay Rs10.80 per litre more now as the bulk price of diesel has gone up,” said the railway ministry official, adding, “The fuel bill will be about Rs2,700 crore more per year due the latest hike.”


The government had yesterday allowed state-run oil majors to fix diesel prices on their own in order to reduce an expanding subsidy bill and budget deficit. Oil companies announced a dual price mechanism while hiking the rates.


While the retail consumer will be paying 50 paisa more per litre, for bulk consumers the hike is more than Rs10 per litre.


The national transporter paid about Rs10,000 crore during the last fiscal towards its fuel bill, which has been rising every year due to increase in fuel cost.


The diesel hike comes at a time when the Railways is facing an acute financial crunch. Earnings from passengers and freight have failed to meet the target in the current fiscal.


The annual plan allocation has also been reduced from Rs60,000 crore to Rs51,000 crore this year.


As per the government’s decision, bulk consumers such as Railways and state transport corporations will have to buy diesel at market price.


Railways procure about 250 crore litre per year from oil companies for its fleet of 4,500 diesel locomotives hauling both passenger and freight trains.


Railways had recently hiked passenger fares in all classes to earn additional revenue of Rs6,600 crore in a year. The passenger fare hike will come into effect from 22nd January.


The three oil PSUs—Indian Oil, HPCL and BPCL—supply fuel providing a subsidy of 30 paisa per litre as Railways is a bulk consumer of diesel.


However, with the subsidy gone, Railways will have to buy fuel at market rate which is likely to hit hard the national transporter.


“We get 80% of our supply from IOC and rest from other two oil majors,” the official said.


Diesel price was raised by Rs5 in September last year.


Last year Railways had effected a 20% hike in freight rates.


However, it seems unlikely that Railways would consider another freight hike despite its rising fuel cost.


“We do not want the Railways to be outpriced in the market because of higher freight rate and we have to be competitive,” railway minister Pawan Kumar Bansal had earlier said.


Currently the Railways' share in the freight market is 36% only while in the US it is 48%. The national transporter wants to attract a higher percentage of freight transportation by offering competitive rates as compared to road transporters.

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