As mineral imports surge, Railways pushes for ‘congestion surcharge’

Vinod Kumar, director-commercial, SAIL,said the import cost coupled with the proposed surcharge would lead to rise in steel prices.

Written by Priyadarshi Siddhanta | New Delhi | Published: November 3, 2014 2:05 am

The 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 21 proposing that in view of the serious congestion at the ports a surcharge at the rate of 10 per cent 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”.

“At the rate which it (imports) is growing, there is no other option but to recover this cost through the surcharge,” the railway board said in the letter.

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 per cent in the traffic loaded at various ports over the last year, it cited.

Opposing the move, Ashok Khurana, director general of the Association of Power Producers, told The Indian Express that the 4 paise hike translates into a hike of Rs 4,00,000 on every million tonne of coal and considering that the country imports currently about 55 MT of coal each year, the thermal power companies will have to shell out Rs 220 crore more each year due to the surcharge.

“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,” Khurana said.

Vinod Kumar, director-commercial, SAIL,said 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.”

Firdose Vandrevala, executive vice chairman, 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.

“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,” he said. A senior steel ministry official said the surcharge would be a double whammy on coking coal imports as in the Budget 2014-15, the government imposed a 2.5 per cent customs duty on metallurgical coal.

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