Railways pushes for congestion surcharge at all ports as Coal, Fertilisers and Iron-ore imports up

Railways pushes for congestion surcharge at all ports as Coal, Fertilisers and Iron-ore imports up

New Delhi: Indian Railways have proposed to levy a ‘congestion surcharge’ at all ports in the country due to a surge in imports of coal, fertilisers and iron ore, a move strongly opposed by industry who have said that it would lead to a rise in prices of electricity, steel and farm output.

The railway board has written to the finance and commerce ministries on October 21st proposing that in view of the serious congestion at the ports a surcharge at the rate of 10% of the base rate would be imposed.

This translates into rise of 4 paise on per kg of coal and iron ore, 5 paise per kg on fertilisers, 3 paise per kg on limestone and dolomite and 5 paise per kg of gypsum.

The board has asked these ministries to treat this proposed rise as a small cost to pay for the massive evacuation which is underway at the ports.The railway board said that “At the rate which imports is growing, there is no other option but to recover this cost through the surcharge.”

The board has justified its proposal saying that the spurt in the imports of minerals and fertilisers has led to a situation where the quantity to be evacuated from ports has far exceeded the planned capacity.

Congestion at various ports has resulted in the Railways’ rolling stock getting overstretched. Last month there was a growth of 25% in the traffic loaded at various ports over the last year.

Opposing the move, Mr Ashok Khurana, DG of the Association of Power Producers, said that the 4 paise hike translates into a hike of INR 4,00,000 on every million tonne of coal and considering that the country imports currently about 55 million tonne of coal each year, the thermal power companies will have to shell out INR 220 crore more each year due to the surcharge.

Mr Khurana said that “This is bound to increase electricity production costs. Since the cost of importing coal is pass through, it would lead to higher power tariffs. The Railways should increase capacity of its rolling stock and construct more railway lines to make movements of its rakes faster.”

Mr Vinod Kumar, director of commercial at SAIL, said that “The import cost coupled with the proposed surcharge would lead to rise in steel prices. All steel companies import huge amount of coking coal to fire their furnaces and considering that coal is an essential ingredient in making steel, imports cannot be cut down.”

Mr Firdose Vandrevala, executive vice chairman of Essar Steel, said that the surcharge would only add to the cost burden of Indian steel industry and a cost push increase on the finished steel.

Mr Vandrevala said that “With Indian steel industry set to grow at faster pace and with lack of adequate supplies of iron ore-coal within the country, imports are bound to increase to meet production requirement. The focus should be on creating necessary infrastructure to handle increased volumes.”

A senior steel ministry official said that the surcharge would be a double whammy on coking coal.