Diesel hike to pinch railways hard

Will put additional burden of Rs.2,700 crore a year

Indian Railways is all set to lose a major chunk of the R6,600-crore extra revenue it was expecting to earn from the recent passenger fare hike as a hefty Rs 10.80/litre increase in the high-speed diesel it purchases from state-run oil firms will put an additional burden of Rs 2,700 crore a year on the cash-strapped entity.

In other words, the railways will lose 40% of the extra yearly revenue it had expected to garner from the passenger fare hike because of the deregulation of the bulk diesel market.The railways accounts for a quarter of bulk diesel consumption. In overall diesel sales of about 90 million tonnes per annum, about 20% are bulk sales.

Railway officials were tight-lipped on whether the fuel hike will be transferred to users in the upcoming budget. As reported by FE earlier, the national transporter was mulling a freight cut to boost volumes and take back market share from roads but given the fuel price hike, it would have to take a fresh call on the issue.

The fuel price hike will inflate the railways' monthly operating cost by Rs 225 crore. "We are yet to take a call whether the freight rates would be increased or not but the fuel hike has put us in a tight spot," said a senior Railway Board official, requesting anonymity.

The cash-strapped national career is already slashing its annual plan outlay for the current fiscal from R60,100 crore to R51,000 crore. At a time when the railways is starved of funds even to meet its operational cost, the fuel price hike will further deteriorate its finances.

The railways' operating ratio, which at present is a worrisome 95%, needs to be brought down to enable investments in modernisation and expansion projects.

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