Railway Board chairman SS Khurana, in an interaction with the media after the Interim Rail Budget, said the railways would lose Rs 700 crore (Rs 7 billion) annually following the fare cut. He also pointed out that the ministry would continue to optimise freight earning through its dynamic pricing policy.

The freight earnings witnessed a decline in the October-November period 2008. How do you see the situation going forward?

The railways faced a slowdown in freight earnings in the October-November period on account of a decline in iron ore and steel traffic and a fall in container demand for the exports-related traffic. However, the situation is better now. Since January 2009, there has been 10 per cent growth in cement and fertiliser traffic.

The railways on Friday announced a 2 per cent cut in passenger fares, both in sleeper and AC coaches. What kind of financial implication will this have on your revenues?

The annual impact of the fare cut on our revenues is estimated to be around Rs 700 crore (Rs 7 billion).

To what extent has the Sixth Pay Commission impacted the financials of the railways?

The financial impact of the new pay commission has been assessed at around Rs 13,500 crore (Rs 135 billion) in the current fiscal and Rs 14,500 crore (Rs 145 billion) in the next fiscal. Had this impact not been there, our cash surplus would have been over Rs 32,000 crore (Rs 320 billion) instead of Rs 18,847 crore (Rs 188.47 billion).

What steps are being taken to minimise the impact of the Sixth Pay Commission?

Improved productivity of our assets and a market-sensitive pricing policy have enabled the railways to absorb the impact of the pay commission recommendations.

The freight rates have been kept unchanged in the Interim Railway Budget. Can we expect rates to move up later in the year?

We will continue with the dynamic pricing policy and keep adjusting freight rates. Freight rates will be increased only to the level the traffic can bear.