01 Rating in Railways.pptiritm.indianrailways.gov.in/uploads/files... · Indian Railway Act • Section 73. • Where a person loads goods in a wagon beyond its permiiblissible carrying

RATINGOFOF

FREIGHT BUSINESSFREIGHT BUSINESSON

INDIAN RAILWAYS

by INDRA GHOSH, ADVISER/RATES, RBTele : +91–11–2338–2868

Tuesday, September 06, 2011 INDRA GHOSH, ADVISER/RATES Slide No. 1

Tele : +91 11 2338 2868+91–99104–87497

E–Mail : [email protected]

DISCLAIMER

Views expressed in this lecture are thatof the speaker and may not necessarilyof the speaker and may not necessarilyreflect the official views of either theCommercial Directorate or Ministry ofR il Th k h fRailways. Thank you very much foryour understanding and kind co–y goperation.


Outline of the Lecture• Indian Railway Act.• Structure of Rates Branch.

F ti f R t B h• Functions of Rates Branch.• Traditional Freight Structure.• Classification of GoodsClassification of Goods.• Freight rates for different classes.• Passenger fares for different classes.g• Formation of Budget proposals.• Private Container Operators.

il ib l• Railway Rates Tribunal.






Outline of the Lecture• Indian Railway Act.


Indian Railway Act• Railway Act 1989.• Chapter VI deals with Fixation of Rates.

S ti 30 (1)• Section 30 (1)• The Central Government may

– from time to timefrom time to time,– by general or special order fix,– for the carriage of passengers and goods,g p g g ,– rates for the whole or any part of the railway, and– different rates may be fixed for different classes of

d dgoods, and– specify in such order the conditions subject to which

such rates shall apply


such rates shall apply.

Indian Railway Act• Section 30 (2).• The Central Government may by a like order,

fi th t f th h i id t l t– fix the rates of any other charges incidental to orconnected with such carriage,

– including demurrage and wharfageincluding demurrage and wharfage,– for the whole or any part of the railway, and– specify in the order the conditions,p y ,– subject to which such rates shall apply.


Indian Railway Act• Section 31• The Central Government* shall have power to :

( ) l if l if dit f th– (a) classify or reclassify any commodity for thepurpose of determining the rates to be charged forthe carriage of such commoditiesthe carriage of such commodities.

– (b) increase or reduce the class rates and othercharges.g


Indian Railway Act• Section 32• Notwithstanding anything said in this Chapter, a railway

d i i t ti *administration* may,– in respect of the carriage of any commodity, and– subject to such conditions as may be specified;subject to such conditions as may be specified;– (a) quote a station to station rate,– (b) increase or reduce or cancel a station to station( )

rate,– (c) withdraw, alter or amend the conditions

h d i i dattached to a station to station rate, and– (d) charge any lump sum rate.


Indian Railway Act• Section 70.

– A railway administration shall not make any or gived bl f d tany undue or unreasonable preference or advantage

to,– in favour of any particular person or any particularin favour of any particular person or any particular

description of traffic in the carriage of goods.• Section 71. (1)( )

– The Central Government may if it is of the opinionthat it is necessary in the public interest to do so,b l i l d di il– by general or special order, direct any railwayadministration –


Indian Railway Act– (a) to give special facilities for, or preference to,– carriage of such goods or class of goods consigned

b tby or to– the Central Government or the Government of any

State orState, or– of such other goods or class of goods.– (b) to carry such goods or class of goods by such( ) y g g y

route or routes and at such rates;– (c) to restrict or refuse acceptance of such goods

l f d h i f ior class of goods at or to such station of carriage,– as may be specified in that order.


Indian Railway Act• Section 71.• (2) Any order made under sub-section (1) shall cease to

h ff t ft th i ti f i d fhave effect after the expiration of a period of one yearfrom the date of such order,

– but may by a like order be renewed from time tobut may, by a like order, be renewed from time totime for such period not exceeding one year at a timeas may be specified in the order.y p

• (3) Every railway administration shall be bound tocomply with any order given under sub-section (1), and

i k b il d i i i i– any action taken by a railway administration inpursuance of any such order shall not be deemed tobe a contravention of section 70 *


be a contravention of section 70.*

Indian Railway Act• Section 72.• (1) The gross weight of every wagon when loaded to its

i i itmaximum carrying capacity,– shall not exceed such limit as may be fixed by the

Central GovernmentCentral Government.• (2) Subject to the limit fixed under sub – section (1),

every railway administration shall determine the normaly ycarrying capacity for every wagon.


Indian Railway Act• Section 73.• Where a person loads goods in a wagon beyond its

i ibl i it hibit dpermissible carrying capacity as exhibited,– a railway administration may, in addition to the

freight and other chargesfreight and other charges,– recover from the consignor, the consignee or the

endorsee, as the case may be,, y ,– charges by way of penalty at such rates, as may be

prescribed, before the delivery of the goods.


Indian Railway Act• Section 78.• Notwithstanding anything contained in the railway

i t th il d i i t ti b f threceipt, the railway administration may, before thedelivery of the consignment, have the right to– Re–measure re–weigh or re–classify anyRe measure, re weigh or re classify any

consignment;– re–calculate the freight and other charges; andg g ;

• correct any other error or collect any amount that mayhave been omitted to be charged.




Structure of Rates Branch• Minister for Railways.*• Railway Board which for rating purpose consists of

M b T ffi Fi i l C i i d Ch iMember Traffic, Financial Commissioner and Chairman.• Additional Member/Commercial.*• Adviser/RatesAdviser/Rates.• Director/Rates.• Deputy Director/Rates.*p y• Chief Rating Officer.• Two sections – TC/R, TC–I.

h i i f• Each section consists of :– Section Officers.

Commercial Inspectors


– Commercial Inspectors.– Assistants.

Structure of Rates Branch• All rating proposals have financial implications,

– hence all of them are required to be routed throughth Fi Di t tthe Finance Directorate.

• Proposals are sent to finance after these have beenapproved by Additional Member/Commercial *approved by Additional Member/Commercial.

• The proposals thus sent are the consolidated views of theCommercial Directorate.


Structure of Rates Branch• Thereafter the file is marked to Adviser/Finance.• Marked downward to :

SO/Fi– SO/Finance.– Director/Finance.– ED/FinanceED/Finance.

• Back to Adviser/Finance.• Proposals thus cleared with remarks are the consolidatedp

views of the Finance Directorate.• Approved by Member Traffic.*

d b i i l i i• Vetted by Financial Commissioner.• Sanctioned either by CRB or by MR.• All the above functionaries are involved in the rating


• All the above functionaries are involved in the ratingprocess.*


F ti f R t B h• Functions of Rates Branch.


Functions of Rates Branch• Decision regarding freight rates of different commodities

is a centralized function of Railway Board.A R il A t thi t l ith Mi i t• As per Railway Act this power vests only with Ministryof Railways.

• Independent of Ministry of FinanceIndependent of Ministry of Finance.• Railway Board need not go even to Parliament for

increasing/decreasing of railway freights.g g y g• This has been so legislated in order to ensure that there is

uniformity of freight rates throughout the country.i i l b k d f il *• Historical background of company railways.*

• Provides for better seamless operations as far asrealization of freight charges are concerned *


realization of freight charges are concerned.*

Functions of Rates Branch• The first exception is in case of giving station to station

rates by zonal railways.Th d ti i i f i i f b t• The second exception is in case of giving of rebatesunder specified laid down schemes, where powers havebeen delegated to Zonal Railways *been delegated to Zonal Railways.

• Maximum upper limits have been laid down for givingof rebates.*

• Zonal railways as also our customers prefer it to be thatway.*


Functions of Rates Branch• Rebates/Surcharges can either be across the board for all

zonal railways, orth ld b f ti l– they could be for a particular zone.

• Rebates/Surcharges can be :– Either for all commodities or for a particularEither for all commodities or for a particular

commodity.*– They could be either of a permanent nature or couldy p

be for a specific period.*– They could be either for certain distances or across

ll di b d iall distance boundaries.– For certain streams of traffic.

• Fact remains that all rating activity is confined only to


• Fact remains that all rating activity is confined only toRailway Board.


Functions of Rates Branch– Classification of goods.– Packing conditions of goods.

Mi ll h– Miscellaneous charges.– Charges related to Port Trust.– Transport of relief materials to affected areasTransport of relief materials to affected areas.– Chargeable weight for commodities.– Train load benefit.– Inflation in distance for charge.– Distance for charge.

i h h– Re-weighment charges.– Clubbing of consignment.


Functions of Rates Branch– Conducting specific studies on commercial matters

in line with reports of various committees such asR il F d F i ht C itt d– Railway Fare and Freight Committee and

– Rail Tariff Enquiry Committee etc.– Memorandum to the Board and Cabinet on proposalsMemorandum to the Board and Cabinet on proposals

received from other Ministries for revision of ratesin respect of specific commodities.p p

• Formulation of Budget Document – Proposals foradjustments in Freight Rates and Passenger Fares in the

il d *Railway Budget.*


Functions of Rates Branch• Subject list of TC – I branch are as follows :

– Free time and demurrage and wharfage rules.Sidi h– Siding charges.

– Railway Rates Tribunal Rules.– Agreements relating to Port TrustAgreements relating to Port Trust.– Commercial aspects regarding Indo – Pakistan, Indo

– Bangladesh Indo – Nepal traffic.*g p– Rules for payment of freight – Paid, To – Pay,

Prepayment conditions etc.l f d li f d– Rules for delivery of goods.

– Undercharges in freight.Weighbridges


– Weighbridges.– Penalties for overloading of wagons etc.

Functions of Rates Branch– Wagon Registration Fees.– E – Payment of freight.

W ki f d h d– Working of goods sheds.– Military traffic.– Rules for carriage of dangerous goodsRules for carriage of dangerous goods.– Notified stations.– Licensing of railway land.g y



F ti f R t B h• Functions of Rates Branch.• Traditional Freight Structure.


Traditional Freight Structure

• Country wide uniformity in tariff.• Uniform telescoping for all commodities.p g• No regional, directional, seasonal or segmental

sensitivity.• Tenuous linkage with input costs.• Cross subsidization across various commodity groups.• Unlimited subsidization of losses on Passenger services• Unlimited subsidization of losses on Passenger services.• Driven by imperatives of revenue generation.• Adjustments in tariff arduous and time consuming.djus e s a a duous a d e co su g.• Averse to business decisions and steeped in straitjacket.• Oblivious to market conditions and business


opportunities.


• Ad hoc tariff adjustments with no comprehensive long term view.

• Unable to respond effectively and timely to customer demands.



• Reduce the spread between the lowest and highest rates.• Introduce integrated tariff and incentive structure customg

tailored for each major business stream – present andpotential.

• Tariff should be based on input costs and leveragerailway’s strengths in long haul and bulk.

• Reduce cross subsidization amongst commodity groups• Reduce cross subsidization amongst commodity groups.• Eliminate tariff lines operating below cost.*• Move towards FAK rates as far as possible with only ove owa ds a es as a as poss b e w o y

limited exceptions.



• Quantum of cross subsidization of passenger business from freight segment should be explicit and transparent.g g p p

• Comprehensive recasting of tariff for military, postaltraffic etc.

• Long term goal for tariff structure rationalization should be spelt out.



• Institutionalization of mechanisms for seasonal, regional, directional and other variations.

• Introduce differential pricing in the bulk segment todrive revenue growth.

• Promote long term arrangements with corporate clients.• Promote growth of business volumes through negotiated

packagespackages.• Promote cargo aggregators and other new business

streams as potentially high revenue segments.s ea s as po e a y g eve ue seg e s.• Enabling mechanisms for revenue maximization from

idle assets and under utilized capacities with speedy


offer of rates.


F ti f R t B h• Functions of Rates Branch.• Traditional Freight Structure.• Classification of GoodsClassification of Goods.


Classification of Goods• All commodities have been classified into 16 different

classes for the purpose of charging of freight.L t l h f i ht i h t i LR 4• Lowest class whose freight is cheapest is LR – 4.

– This is approximately equivalent to class rate of 60.• Highest class whose freight is the maximum is 200X forHighest class whose freight is the maximum is 200X for

export Iron Ore,– This is approximately equivalent to class rate of 450.pp y q

• All other commodities come somewhere in between.• Over the years railways have gradually reduced the

b f l fnumber of classes from 59 to 16.• It has been attempted to fit all commodities into one of

these existing classes only *


these existing classes only.*

Classification of Goods• Along with reducing the number of classes, the total

number of commodities which have been so classifiedh l b d dhave also been reduced.

• Over the years railways have reduced the total number ofclassified commodities from over 4000 to only 21classified commodities from over 4000 to only 21groups.

• An over – riding clause stipulates that if any commodityg p y ydoes not figure in the list of commodities which havebeen classified,

h i h ld b h d h hi h l *– then it should be charged at the highest class rate.*


Classification of Goods• Logic given was that railways are simplifying the freight

structure and will be easier for customers to understand.*• This reduction in number of commodities has beenThis reduction in number of commodities has been

incorrect.• After all if 4000+ number of commodities were being

d b il litransported by railways earlier,– then even today more or less the same number of

commodities are likely to be transported.commodities are likely to be transported.• There may have been some reduction in commodities

due to block rake movement,*b t h d ti ld h b b 20%– but such reduction would have been maybe 20% –30% at the most.

• It cannot justify such drastic reduction.


j y

Classification of Goods• As a result of number of classified commodities having

been reduced,th l b f diti hi h d t– there are large number of commodities which do nothave any class at all.

• Present rules stipulate that all of them are to be chargedPresent rules stipulate that all of them are to be chargedat the highest class rate.

• As a result of the above some of these commodities havemoved to road.

• Secondly, by reducing the number of classes from 59 toh b f i h f dj i i l h16, the gap between freight rates of adjoining classes has

substantially increased.• Any change of class even by one step increases the


• Any change of class even by one step increases thefreight rate substantially.

Classification of Goods

• As of today the following classes exist :• LR – 4 Bamboos, Coffee, Tea, Coir, Cotton.• LR – 3 Charcoal, Paper.• LR – 2 Fireworks.LR 2 Fireworks.• LR – 1 Jute, Organic manure, Timber.• Class 100 Leather Rubber & Plastic Edible oil• Class 100 Leather, Rubber & Plastic, Edible oil.• Class 110 De – oiled cake, Sugar, Salt.

Cl 120 Cl Ch i l F d i• Class 120 Clay, Chemical manure, Food grain.• Class 130 Bricks, Steel Pipes, Wire rod coils.


Classification of Goods

• Class 140 Cement, Coal & Coke Slag.• Class 150 Molasses, Gypsum, Sand & Stones.yp• Class 160 Minerals & Ore, Metal scrap, Pig Iron.• Class 170 Bitumen, Iron Ore for domestic.Class 170 Bitumen, Iron Ore for domestic.• Class 180 Alloys & Metals, Iron & Steel, LPG.• Class 190• Class 190 –• Class 200 Acids, Alcohol, Petroleum products.

Cl 200X I O f t• Class 200X Iron Ore for export.


Classification of Goods• Chargeable carrying capacity was made uniform with

effect from 1.4.2005, andi i i ht diti d ith– minimum weight condition was done away with.

• Consignments carried in any type of wagon will becharged as per the Prescribed Carrying Capacity (PCC)charged as per the Prescribed Carrying Capacity (PCC)of that type of wagon.*

• For example, earlier bamboo being a light commodityp , g g ywas charged for a minimum weight of 22T.

• As per the revised PCC, consignment of bamboo wash d f h f ll i i f hcharged for the full carrying capacity of the BCN wagon

at 63T.• This resulted in substantial amount of idle freight being


• This resulted in substantial amount of idle freight beingpaid for such light weight consignments.

Classification of Goods• In order to compensate for the idle freight and reduce the

same to a large extent,th l ifi ti f li ht i ht diti– the classification of light weight commodities wasreduced in number of cases,

– in order to bring down the overall freightin order to bring down the overall freight.


Classification of Goods• Previous/revised chargeable weight and class :

Previous RevisedCommodity MWC Class PCC Class

Bamboo 22 145 63 LR – 4

Ch l 34 130 63 LR 3Charcoal 34 130 63 LR – 3

Coir 12 190 63 LR – 4Coir 12 190 63 LR 4

Jute 30 160 63 LR – 1



F ti f R t B h• Functions of Rates Branch.• Traditional Freight Structure.• Classification of GoodsClassification of Goods.• Freight rates for different classes.


Freight rates for different classes• Railway Board publishes a freight rate table which gives

– class wise freight rate,t– per tonne,

– for different distance slabs.• It is a historical table and has been existing since timesIt is a historical table and has been existing since times

immemorial.*• Over the years it has undergone only minor cosmeticy g y

changes,– without any major changes having been attempted.h i i h i i di• There is a taper with increasing distance,– which is the same for all commodities in that class.


Freight rates for different classes

100 120 140 160 180

Freight/tonne for different classes and distance slabs

Distance/Class

201 – 210 147 176 205 235 264

301 – 310 202 243 283 324 364

401 – 410 258 309 361 412 464

801 – 825 494 593 692 790 889

1201 1225 719 863 1007 1151 12951201 – 1225 719 863 1007 1151 1295

1501 – 1525 887 1064 1241 1419 1596


1801 – 1825 1033 1240 1446 1653 1859

Freight rates for different classes• Rates for different classes are modified based on

– whether the rate is to be increased or decreased.• The marginal adjustments are done depending onThe marginal adjustments are done depending on

– whether same has been increased or reduced in thelast couple of years, and

i f h h ffi b– our perception of what the traffic can bear.• No exercise has been done of making an ab-initio

analysis of the cost of operation and for fixing of ratesanalysis of the cost of operation and for fixing of ratesaccordingly.*

• In most cases it is not only difficult but impossible.*C t f h li f d i k d t k i th• Cost of hauling a foodgrain rake and a cement rake is thesame,

– but they cannot be charged equally.*


y g q y

Freight rates for different classes• There are two ways of changing the freight rate of any

commodity.I f i ht t f ti l dit i t b• In case freight rate of a particular commodity is to beincreased, then the same can be done

– either by increasing the freight rate for that classeither by increasing the freight rate for that class,– in which case freight rate of all commodities in

that class will be uniformly increased; ory ;– alternatively, the classification of that particular

commodity can be increased,h h h d ff h– so that the change does not effect any other

commodity.


Freight rates for different classes• This is the main drawback of reduced number of classes.• Logic given was that railways are simplifying the freight

t t d it i i f t t d t d *structure and it is easier for customers to understand.*• No customer deals in fifteen different commodities.• Neither do they deal over varying distancesNeither do they deal over varying distances.• Most of them deal with select few commodities and they

are aware of the classification of their own commodities.• Similarly, their traffic does not go all over the country to

hundreds of destinations.h l f d i i hi h h i– there are select few destinations to which their

consignment is despatched, andall customers know the freight rates to those


– all customers know the freight rates to thosedestinations.

Freight rates for different classes• Another reason given was that by simplifying the freight

structure it will be easier for field staff to understand.*Wh t t b k hi i t th• When a customer comes to book his consignment theCGS first checks up Goods Tariff, Part I (Vol. II), whichis the book of classification in order tois the book of classification in order to

– verify the class of that commodity;– let us say the commodity class is 140.y y

• Thereafter the CGS will calculate the distance from theoriginating to the destination station,

i h h h di d– using the through distance and– the junction distance tables.

• Let us say the distance comes to 763 kms


• Let us say the distance comes to 763 kms.

Freight rates for different classes• CGS will lastly open the freight rate table and check up

the freight rate per tonne for class rate 140 at thedi t l b f 760 770 k di t *distance slab of 760 – 770 kms. distance.*

• The freight rate at Class 140 for distance of 763 Kms.comes to Rs 648 10/tonnecomes to Rs. 648.10/tonne.

• Having obtained the freight rate/tonne he finallymultiplies the freight rate/tonne with the total load of thep grake to arrive at the total freight.

• Let us say the total weight of the consignment comes to2450 tonnes.

• So the total freight is worked out asRs 648 10 x 2450 = Rs 15 87 845/


– Rs. 648.10 x 2450 = Rs. 15,87,845/-• This is the complete cycle.

Freight rates for different classes• In this entire cycle the following activities are common

irrespective of whatever may be the class of theditcommodity;

– Goods Tariff, Part I (Vol. II).– Through Distance table andThrough Distance table, and– Junction distance table.– Freight rate table.*g

• Even in this he has to finally consult a table,– Whether there are 15 columns in that table or 30

l i i i lcolumns is immaterial.• The CGS has to see one column and one row in that

table


table.

Freight rates for different classes• As far as the CGS is concerned his workload remains the

same.With FOIS thi h b h i• With FOIS things have now become much easier.

• No CGS deals in fifteen different commodities.*• Most of them deal with select few commodities and theyMost of them deal with select few commodities and they

are aware of the classification of their own commodities.• Neither do they deal over varying distances.y y g• Traffic booked from specific goods shed does not go all

over the country to hundreds of destinations.h l f d i i hi h– there are select few destinations to which

consignment from each goods shed is despatched.• All CGSs know the freight rates to those destinations *


• All CGSs know the freight rates to those destinations.*

Freight rates for different classes• By reducing the total number of different commodities,

which have been classified, from 4000+ to 21 groups,dand

– by reducing the overall number of classes from 59 to16;16;

• Railways have made it practically impossible to changethe freight of an individual commodity without changingg y g gits classification.

• Perhaps the officials who undertook that exercise did notli h i li i f h i irealize the implications of their action.

• Wanted to gain easy kudos.*


Freight rates for different classes• Comparison with the Wholesale Price Index (WPI)

which measures the annual inflation gives a good idea ofth h i f i ht t i à i th WPIthe change in freight rate vis-à-vis the WPI.

• Data has been collected for displaying changes in freightrate of 7 important commodities over last 15 yearsrate of 7 important commodities over last 15 years.

• The commodities selected are :– Food Grain.– Fertilizer.– Coal.– HSD.– Cement.

Iron & Steel


– Iron & Steel.– Other Goods, which is basically a mixed basket.

Increase in Foodgrain freight (1177 kms)

259

300

187196

206216

229

227 227 227 227200ea

se >

133141 145

156 161 167176

187

166 166 166

185

200

% In

cr

100113

122 127 133

109 109

142149 149

155 155 155

100100

109 109

1993

1995

1997

1999

2001

2003

2005

2007

2009

Years


WPI Foodgrain

Increase in Fertilizer freight (825 kms)

259

300

187196

206216

229

227200ea

se >

133141 145

156 161 167176

187

161 166 164 164 164175 175 175

200

% In

cr

100113

122 127 133

104 104 104

135 135 140

161 164 164 164

142

100100 104 104 104

1993

1995

1997

1999

2001

2003

2005

2007

2009

Years


WPI Fertilizer

Increase in Coal freight (611 kms)

259

300

187196

206216

229

200ease

>

133141 145

156 161 167176

187

167 167 170 170 170 170

200

% In

cr

100113

122 127 133

104112

123

142 142 148 151 154 155 155

100100 104

1993

1995

1997

1999

2001

2003

2005

2007

2009

Years


WPI Coal

Increase in HSD Freight (640 kms)

259

300

187196

206216

229

200ease

>

133141 145

156 161 167176

187

158 163 160

200

% In

cr

100113

122 127 133

113121

133

149 149155 158 163 160

148 148 148138

132 126

157

100100

1993

1995

1997

1999

2001

2003

2005

2007

2009

Years


WPI HSD

Increase in Cement freight (561 kms)

259

300

187196

206216

229

200ease

>

133141 145

156 161 167176

187200

% In

cr

100113

122 127 133

109117

129144 141

147 150 154 154148

154 154 157 157 157 157

100100

109

1993

1995

1997

1999

2001

2003

2005

2007

2009

Years


WPI Cement

Increase in I&S Freight (1006 kms)

259

300

187196

206216

229

200ease

>

133141 145

156 161 167176

187200

% In

cr

100113

122 127 133

106114

125 128 126 131 133 136 130124 124 124 126 126 126 126

100100

106

1993

1995

1997

1999

2001

2003

2005

2007

2009

Years


WPI Iron & Steel

Increase in Other Goods (830 kms)

259

300

187196

206216

229

200ease

>

133141 145

156 161 167176

187200

% In

cr

100113

122 127 133

104112

123138 138 143

150 155 152 152 152 152 155 155 155 155

100100 104

1993

1995

1997

1999

2001

2003

2005

2007

2009

Years


WPI Other Goods


F ti f R t B h• Functions of Rates Branch.• Traditional Freight Structure.• Classification of GoodsClassification of Goods.• Freight rates for different classes.• Passenger fares for different classes.g


Passenger Fares for different classes• Passenger fares are decided more or less on the basis of

political compulsions rather than for administrativereasons.

• While some of the upper class services are priced on thehigher sidehigher side,

– our sleeper class fares, and– general second class fares are under priced.g p

• IR’s Monthly Season Tickets (MSTs) and QuarterlySeason Tickets (QSTs) for suburban services are

b bl h h i h ldprobably the cheapest in the world.


Passenger Fares for different classes• In case of most commuters using IR’s suburban services,

the cost of their MSTs/QSTs are being reimbursed byth i ti h th k *the organizations where they work.*

• Today a passenger spends more in traveling by Autofrom a suburb of Delhi to the New Delhi railway stationfrom a suburb of Delhi to the New Delhi railway station,

– than what he spends on his sleeper class ticket fromNew Delhi to Lucknow.

– Despite knowing all this we are not willing toincrease passenger fares.

hil i l i h k l b• While some marginal increases have taken place by wayof reservation charges, Tatkal Seva etc.,

across the board revision of fares has not taken place


– across the board revision of fares has not taken placefor quite some time.

Passenger Fares for different classes• Suffers from absence of co–relation between tariff and

input cost.U Cl d d titi b t d i• Upper Classes rendered uncompetitive by repeated pricehikes in the past.*

• Inadequate appreciation of what ‘customer can pay’ *Inadequate appreciation of what customer can pay .• No formalized mechanism to identify customer needs

and perceptions.*p p• Consequent unfettered expenditure on ‘passenger

amenities’ with loosely defined standards.i *• Losses on passenger services are not transparent.*

• Suburban services and MSTs highly subsidized.


Passenger Fares for different classes• Spread between the highest and the lowest fares needs to

be reduced.S b b f h ld b i d d t i t t• Suburban fares should be indexed to input costs.

• MST fares should be increased from 15 journeys to 25 insteps of 2 journeys per yearsteps of 2 journeys per year.

• Second Class Mail/Express fares to be increased @ 5%per year to eliminate losses.p y

• No subsidy to Second Class Ordinary Fare.• Suburban subsidy to be limited to MSTs only by way of

di f f d i d f d lpercentage discount of fare derived from Second ClassOrdinary fares.

• Variable pricing to be introduced for revenue generation


• Variable pricing to be introduced for revenue generationfrom popular trains.*

Passenger Fares for different classes• Non suburban business must be self sustaining.• Fares for Second Class Ordinary and Sleeper Class need

t b i d d t i t t t li i t lto be indexed to input costs to eliminate losses.• Suburban business may continue to need partial and

controlled subsidizationcontrolled subsidization.• Subsidy to suburban business must be capped in

financial terms for transparency.p y• Suburban fares should be indexed to fuel costs.*• Products and prices need to focus sharply on the target

segment.


Increase in I AC fares (893 kms)

259

300

187196

206216

229

200ease

>

133141 145

156 161 167176

187

163

188 188 188198 198 198 198

162

200

% In

cr

100113

122 127 133

106117

128141

163 162153

141 141

100100

106

1993

1995

1997

1999

2001

2003

2005

2007

2009

Years


WPI I AC

Increase in 2 AC fares (781 kms)

259

300

187196

206216

229

200ease

>

133141 145

156 161 167176

187

159165 165 165

176 176 176 176

159

200

% In

cr

100113

122 127 133

106120

132145

159 159152 146 146

100100

106

1993

1995

1997

1999

2001

2003

2005

2007

2009

Years


WPI 2 AC

Increase in 3 AC fares (858 kms)

259

300

187196

206216

229

200ease

>

133141 145

156 161 167176

187

183 183 183195 195 195 195 195 195 195 195

200

% In

cr

100113

122 127 133

110121

133

149

100100 100

1993

1995

1997

1999

2001

2003

2005

2007

2009

Years


WPI 3 AC

Increase in Sleeper class fares (751 kms)

259

300

187196

206216

229

200ease

>

133141 145

156 161 167176

187200

% In

cr

100113

122 127 133

106 106 111 117126

138 138 138150 150 150 150 150 150 150 150

100100

106 106

1993

1995

1997

1999

2001

2003

2005

2007

2009

Years


WPI Sleeper Class

Increase in Second class fares (349 kms)

259

300

187196

206216

229

200ease

>

133141 145

156 161 167176

187200

% In

cr

100113

122 127 133

105 105 105 105112 112 112 112

119 119 119 119 119 119111 111100

100 105 105 105 105

1993

1995

1997

1999

2001

2003

2005

2007

2009

Years


WPI Second Class


F ti f R t B h• Functions of Rates Branch.• Traditional Freight Structure.• Classification of GoodsClassification of Goods.• Freight rates for different classes.• Passenger fares for different classes.g• Formation of Budget proposals.


Formation of Budget Proposals• Only schemes which are announced in the budget are

worked out much in advance, andi i tifi– in a scientific manner.

• Most of them are worked out depending on– suggestions received from zonal railwayssuggestions received from zonal railways,– suggestions given by major customers during

customer meets,,– letters received from industry wise associations such

as Cement Manufacturers Association etc.f h b d di h d• Many of the rebates and discounts that are announced

across the board are also worked out in advance.


Formation of Budget Proposals• Regarding increase in freight rates, in the budget,

– these are worked out on a need basis,*d di th t f i d t b– depending on the quantum of revenue required to begenerated.*

• All types of data are available on the computer with theAll types of data are available on the computer with theStatistics Directorate.

• Excel provides an excellent tool for analyzing,p y g,– how much revenue will be generated,– by increasing the freight rate of which class, or

f hi h i l di– for which particular commodity.• Amongst the various alternatives thrown up the one

which is likely to have least political impact is selected *


which is likely to have least political impact is selected.*• Once the target is met the exercise is ended.*


F ti f R t B h• Functions of Rates Branch.• Classification of Goods.• Freight rates for different classesFreight rates for different classes.• Passenger fares for different classes.• Formation of Budget proposals.g p p• Private Container Operators.


Private Container Operators• In 2006 licenses were granted to 14 Private Container

Operators (PCOs) for running their own trains,b i h li h t il– by paying hauling charge to railways.

• In 2007 another 2 operators took new licenses.• Idea was that they would contribute towards cargoIdea was that they would contribute towards cargo

aggregation, and– bring back part of the piece – meal traffic that wasg p p

lost as a result of block rake movement.• PCOs are prohibited from carrying certain restricted

di icommodities,– such as coal,

all types of ores and minerals


– all types of ores and minerals,– petroleum products, etc.

Private Container Operators• Haulage charge is worked out based on a spread sheet

calculation.Th f ll i i l d d i th l l ti f th• The following are included in the calculation of thehaulage cost.

• Basic dataBasic data.• Documentation etc.• Line haul cost.• Provision and maintenance cost.• Total Direct Cost.

ll i ib d• Fully Distributed Cost.• 10% for loss of path to other trains.• Profit margin 20%


• Profit margin 20%.

Private Container Operators• Basic data :

– Type of wagon.Lif f– Life of wagon.

– Number of wagons.– Capital cost of rake in lakhsCapital cost of rake in lakhs.– Pay load.– Tare weight.g– Lead.– Wagon turn round.

i– Empty return ratio.– NTKM.

GTKM


– GTKM.– No. of terminals.

Private Container Operators– No. of marshalings.– Train Kms.

N f TEU– No. of TEU.


Private Container Operators• Documentation Cost :

– 12 invoices per rake.T i l t– Terminal cost.

– Marshaling cost per wagon per yard.• Line Haul Cost :Line Haul Cost :

– Cost of traction per 1000 GTKM.– Cost of other transportation per Train Km.*p p– Cost of Signaling per Train Km.– Cost of Track per Train Km.

l i l– Total Line Haul Cost.


Private Container Operators• Provision and Maintenance Cost :

– Cost of repair and maintenance.I t t it l t f– Interest on capital cost of wagon.

– Depreciation element.– Total Provision and Maintenance CostTotal Provision and Maintenance Cost.

• Total Direct Cost (sum of all of above)– General overheads.*– Central charges.*– Escalation for 2008 – 09 over 2005 – 06.

ll i ib d ( )– Fully Distributed Cost (FDC).• Reduced FDC for Special Wagons.


Private Container Operators• Add 10% loss of path to trains.• Profit Margin of 20%.

R t T i K• Rate per Train Km.• Maintenance charge at 5%.• Rate per TEU per Km with maintenanceRate per TEU per Km with maintenance.• Reduced FDC per TEU.


Private Container Operators• As per IR’s agreement with PCOs,

– They were required to develop their own terminalsithi 3within 3 years.

– Have been permitted use of Railway Goods Shedstemporarilytemporarily.

– Group III – Handling < 7 rakes per month.– Group II – Handling < 12 rakes per month.p g p– Group I – Handling > 12 rakes per month.

• Terminal Access Charge of Rs. 34,000/- per terminal perl di / l di f h kloading/unloading of each rake.

• Being extended on a year to year basis.*• Problems of stabling *


• Problems of stabling.*





Railway Rates Tribunal• Ministry of Railways (MOR) has consistently

maintained that no external regulatory authority isi d f d idi f i ht t t IRrequired for deciding freight structure on IR.

• A paper on the subject has been submitted by MOR toPlanning Commission on which final decision yet to bePlanning Commission on which final decision yet to betaken.

• Budget Branch is understood to have prepared ag p pproposal for setting up a Bureau of Railways Costs andPricing under FC.


Railway Rates Tribunal• All activities related to costing, market research and

pricing sensitivity etc. are envisaged to be assigned toBOCPBOCP,

– which in turn will issue pricing directives tocommercial branchcommercial branch.

• If a reliable costing system is in place, and– pricing policy adheres to clearly set norms in respectp g p y y p

of margins,– then no regulatory mechanism seems called for.*


Railway Rates Tribunal• Railway Act 1989.• Chapter VII deals with Railway Rates Tribunal.

S ti 33 (1)• Section 33. (1)• There shall be a Tribunal to be called the Railway Rates

Tribunal (RRT) for the purpose of discharging theTribunal (RRT), for the purpose of discharging thefunctions specified in this chapter.

• Section 33. (2)( )– The Tribunal shall consist of a Chairman and two

other members to be appointed by the CentralGovernment.

– Other sub–sections (3) to (8) of Section 33 lay downthe terms and conditions of appointment and the


the terms and conditions of appointment and thepowers of members of RRT.

Railway Rates Tribunal• Section 35.

– The Tribunal may sit at such place as it may findi t f t ti f it b i *convenient for transaction of its business.*

• Section 36.– Any complaint that a railway administration –Any complaint that a railway administration

– (a) is contravening the provisions of Section70*; or.;

– (b) is charging for the carriage of anycommodity between two stations a rate which is

bl *unreasonable*, or– (c) is levying any other charge which is

unreasonable


unreasonable,– may be made to the Tribunal.


– Nothing in this Chapter shall confer jurisdiction onth T ib l i t fthe Tribunal in respect of –

– (a) classification or re–classification of anycommoditycommodity.

– (b) fixation of wharfage or demurrage charges(including conditions attached to such charges),( g g ),

– (c) fixation of fares levied for the carriage ofpassengers and freight levied for the carriage ofl l il i l d ililuggage, parcels, railway material and militarytraffic; and(d) fixation of lump sum rates


– (d) fixation of lump sum rates.


– (1) The Tribunal shall have the powers of a civilt d th C d f Ci il P d f thcourt under the Code of Civil Procedure, for the

purposes of– taking evidence on oathtaking evidence on oath,– enforcing the attendance of witnesses,– compelling the discovery and production ofp g y p

documents,– issuing commissions for the examination of

i dwitnesses and– of review.


Railway Rates Tribunal• Section 41.• In the case of any complaint under clause (a) of section

3636,– whenever it is shown that a railway administration

charges one trader or class of traders orcharges one trader or class of traders, or– the traders in any local area,– lower rates for the same or similar goods, org ,– lower charges for the same or similar services than it

charges to other traders in any other local area,h b d f idi h h l h• the burden of providing that such lower rate or charge

does not amount to an undue preference, shall lie on therailway administration


railway administration.

Railway Rates Tribunal• In deciding whether a lower rate or charge does not

amount to an undue preference,th T ib l i dditi t th– the Tribunal may, in addition to any otherconsiderations affecting the case,

– take into consideration whether such lower rate ortake into consideration whether such lower rate orcharge is necessary in the interests of public.



– In the case of any complaint made, the Tribunalmay –

– fix such rate or charge as it considers reasonablefrom any date as it may deem properfrom any date as it may deem proper,

– not being a date earlier to the date of the filing ofthe complaint;p ;

– direct a refund of amount, if any, as being theexcess of the rate or charge fixed by the Tribunal

d l (i)under clause (i).






Thank You


Rating of freight on IR

Anyquestions

l ?please ?


RATINGOFOF

FREIGHT BUSINESSFREIGHT BUSINESSON

INDIAN RAILWAYS

by INDRA GHOSH, ADVISER/RATES, RBTele : +91–11–2338–2868


Tele : +91 11 2338 2868+91–99104–87497

E–Mail : [email protected]


Documents

01 Rating in Railways.pptiritm.indianrailways.gov.in/uploads/files... · Indian Railway Act • Section 73. • Where a person loads goods in a wagon beyond its permiiblissible carrying