Home » Indian Budget » Budget 2006-2007 » Rail Budget 2006-2007 » Dynamic Pricing Policy Announced for Freight and Passenger Services

  General perceptions so far has been that Railways finances can not be improved without increasing fares but moving away from the beaten path, the Railway Minister today announced a series of measures aimed at taking Railways to achieve new heights in performance which had reached a historic level of Rs. 11,000 crore of fund balance in 2005-06. Central to the strategy is  “increase volumes – reduce unit costs

            Proposing the dynamic pricing policy, the Railway Minister said that in the past Railways’ passenger fares and freight rates remained unvarying for all seasons and for all routes, whereas tariffs in the airline and road sectors vary depending upon the demand and the season. In order to face the challenges posed by stiff competition,  it is proposed to introduce a Dynamic Pricing Policy for freight as well as passenger, for peak and non-peak seasons, premium and non-premium services, and for busy and non-busy routes. As per this policy the rates for non-peak season, non-premium service and empty flow directions will be less than the general rates and the rates for peak season and premium services could be higher than normal. For the freight the non-peak season would be 1^st July to 31^st October. For the passenger segment this period would be 15^th January to 15^th April and 15^th July to 15^th September.

No increase in freight rates

The Minister announced no across the board increase in freight rates for 2006-07. Instead, to simplify and rationalize goods tariff, he proposed to reduce the number of commodity Groups to a mere 28 and to lower the highest class for charging freight to from 240 to 220. With this, there will be a reduction in freight rates of diesel and petrol by around 8%. He added that, over the next three years the highest class will be lowered below 200 the rates for the highest classification would be less than double that of the lowest classification.

Non-peak season incremental freight discount scheme

Shri Lalu Prasad announced that the rebate of 15% would be offered of over Rs.5 cr in a month and 10 % if the incremental earning is less than Rs. 5 cr.  This rebate would be applicable for all commodities except coal, minerals and items with classification below 120, during the period from 1^st July to 31^st October, when the demand for freight transportation dips on  account of monsoon.

Empty flow Direction Freight Discount Scheme

Shri Lalu Prasad also proposeded a heavy discount on incremental freight in the empty flow direction. For distances beyond 700 kms., the discount would be 30% during non peak season and 20% in the peak season. The scheme would be applicable for all items loaded in covered wagons.  In the case of open wagons, the discount would be applicable for all commodities except coal, coke and iron-ore for export. In peak season, this discount will be applicable for open wagons for distances over 1000 kms. only.

Loyalty Discount Scheme

To encourage the transportation of cement and iron & steel by rail, Railway Minister  announced Loyalty Discount Scheme.  Under this scheme, during the non-peak season, if over 90% of the production of any steel or cement factory is transported by rail, a discount of 1% in freight would be given.  The discount would be half percent if the share of rail transportation is above 50% but less than 90% of the total production.  This discount would be applicable on the transportation of finished products only.

Long-term freight discount scheme

Now the zonal railway administration will be able to offer a long-term transportation discount of up to 20% during non-peak season and up to 10% in the peak season, over the normal rates, for a period of three years. For loading in empty flow direction, the discount would be up to 20% and 30% during peak season and non-peak season, respectively.

Terminal Incentive Engine-on-load Scheme

With a view to bring down the wagon turn round time, Shri Prasad also announced that the customers who invest in their terminals and complete loading/unloading in lesser time, will qualify for 5% rebate in the first year. Over the next ten years the rebate will be given at a diminishing rate and would be 1% from the fifth year onwards.

Mini Rake and 2-point rake scheme

Considering the popularity of mini rake and two-point rake scheme, Shri Prasad announced extensions of this facility to both in the peak and non-peak season.  During the non-peak season, mini-rakes, 2-point rakes will be made available without any additional charge, whereas during the peak season, for commodities up to class 130, the freight rates charged for commodities loaded in such rakes will be 5% more than the rate for block rake trains.

Freight Forwarder Scheme

To increase Railways’ share in the piecemeal traffic segment, the Minister announced a new Freight Forwarder Scheme.  For goods booked under this scheme during non-peak season, freight would be charged under Class LR2 in empty flow direction and under Class 100 in the loaded direction.  During peak season, the freight would be charged under Classes 100 and 130 respectively.  For round-trip loading i.e. for loading offered simultaneously for both the directions, the freight would be charged under LR2 during non-peak season and under Class LR1 during peak season.