Criticising the Railways of hiking freight by almost 300 per cent in the last three years, the mining industry on Monday demanded a long term freight policy to make it more cost-competitive to enable miners contribute in containing inflationary trends within the economy.
"The iron ore industry is trying to reduce cost to bring down the effect of high inflation and also expect positive response from Railway Board... by reducing freight," the Federation of Indian Mineral Industries (Fimi), the apex body of Indian miners, said in a letter to the Railway Board.
"Industry earnestly requests you to roll back the recent hikes in rail freight for domestic as well as export to help it reduce cost. Any kind of increase in logistic cost is unjustified as will result in increase in cost of steel which will further lead to inflationary pressure," Fimi argued.
Fimi's letter comes amid reports that 46 per cent rise in iron ore prices led to the mineral sector contributing by a whopping 38.2 per cent in the inflation which shot up to 7 per cent.
The mining industry body criticised the Railways for re-classifying iron ore in category-180 from 170 from Tuesday besides hiking the port congestion surcharge on exports of the mineral from 60 to 100 per cent from April 15.
"Railways have increased freight substantially on iron ore which is almost 300 per cent in the last three years," Fimi said in its letter and pointed out that the "scourge of imposing surcharge and other such levies was introduced in 2006-07 in the name of dynamic freight policy."
The miners' body cited that railway freight in Australia, Brazil and China is as low as 0.43 paise per tonne per kilometre, while in India it is as high as Rs 2.40 per tonne.
Despite fetching highest revenue for the Railways after coal, the iron ore industry was facing the brunt of high freight rates year after year.
"The mining industry requests you for a long-term freight policy, which focuses on infrastructure development, garnering more shares in movement of material from other mode, making the industry competitive with other countries in terms of freight cost," Fimi said in its letter to the Railway Board.
It pointed out that there is a tendency that freight is usually not increased in the Railway Budget, but a number of circulars are brought during the course of the year to hike freights, which derailed various development plans of the industry as the miners prepared their budget based on freight announced during the Union Budget.
"Iron ore industry is already burdened with number of duties and taxes and is operating in most difficult geographies in India. Logistic cost has no parallel and is almost 90 per cent of the total cost," the Federation argued.
Fimi pointed out that the biggest cost element for iron ore is the transportation cost apart from mining and other statutory charges. "Due to poor infrastructure, transportation cost is inexorably high compared with other competitive countries."
The steel industry has been arguing that rise in steel prices was essentially due to high iron ore prices, which are more than $ 150 currently in spot markets. They have expressed concern that unabated export of the mineral to neighbouring China could trigger raw material crisis for them in the future, which could upset their expansion plans.
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