The iron and steel industry will save over INR 500 crore in a year on the cost of transportation through Railways if the freight class for iron ore is changed to 145 from 165 now. Not in a position to forgo such a hefty amount, the Railways has now taken the matter to the Prime Minister’s Office to bring to an end the ongoing tussle with the steel ministry over reclassification of freight class for the raw material.
Following repeated plea from the industry, the steel ministry had written to the Railways ministry to change the freight arguing that since iron ore is essentially a raw material, it should be put on the same bracket with coal and limestone, under freight class 145 and not as a finished product like steel in the freight class 165.
The Railways, on the expected lines, expressed its reservations on the steel ministry’s demand. Considering the anemic revenue growth of the national carrier on the back of the subdued expansion of the economy, it would be difficult for the Railways to do away with the amount.
The iron and steel industry, however, is looking up on the back of a pick up in demand and price rise, though reclassification of iron ore would be beneficial for the industry still struggling to get over from the prolonged bad patch. India produced 135 MT iron ore in 2015-16.
The change in freight class will help the domestic iron and steel industry to become more competitive by reducing the cost of transportation. It might also provide a demand fillip for the raw material and thus, partially help the Railways to keep its maintain revenue.
Earlier in the year, Railways abolished the dual freight rates for iron ore to help the industry look for the export market, where the rate was higher by INR 300 per MT than for ore meant for domestic customers.
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