Rail Budget: Freight rate for grains and pulses up 10%

NEW DELHI: Railway minister Suresh Prabhu has announced a 10% increase in freight rates for grains and pulses in the railway budget for the next fiscal, which traders said will make these commodities costlier for consumers.

Retail prices of rice and wheat are expected to increase between 50 paise to Re 1 per kilogram while pulses may cost Rs 1-2 more per kg, commodity traders said. Prices of coarse grain such as corn, barley and jowar, too, may go up.

“The Food Corporation of India will have to bear an extra expenditure. Considering that it handle 60 million tonnes grain and by taking average freight cost of Rs 1,500 a tonne the increase in freight will come to Rs 900 crore,” said Tejinder Narang, a food grain expert based in New Delhi.

Narang said that roller flour mills that buy wheat under the open market sale scheme of FCI will pass on the freight increase to consumer by approximately 50 paise a kg.

Veena Sharma, secretary of the Roller Flour Mills Federation of India, said, “Any increase in railway freight is bound to increase the flour price.”

Currently, 1,500 flour mills across the country process 22 million tonne wheat annually for making flour, maida and suji.

Officials of companies trading in wheat and rice said they didn't have the option to move to road transport because of their high volumes and long distances.

An official of a multinational company said the freight increase goes against the government’s goal of encouraging private trade. “The 10% increase in food grain freight rate is detrimental to the private trade, which is already limited due to increased government intervention in the grain space,” the person said. “The aim of the railway minister is effectively going to be a non-starter as the largest grain mover is also a government entity — the Food Corporation of India (FCI).”

Export prices of rice, too, will go up because 75% of the transportation of the 7-8 million rice exports is done by the railways, industry insiders said.

“In retail, rice being sold for Rs 20 a kg rice might increase by 50 paise. Similarly, Indian white rice quoted at $ 350 a tonne will see a hike of $2 per tonne,” said BV Krishna Rao, managing director at Pattabhi Agro Foods, the country’s biggest exporter of non-basmati rice.

Companies and traders said road transporters may also increase freight charges.

“We don’t have the option, but to pass the hike on to consumers,” said Sunil Baldewa, pulses importer and trader at Siliguri Associates in Delhi. “Most of the imported and domestic crop come from ports and southern states and a rise in prices is imminent at 1.25-2.50 per kg,” he said.

Baldewa expects wheat prices to go up by about Rs 1.70 a kg, yellow peas by Rs 1.70 and bajra by Rs 2.50 a kg.