The railways are planning to introduce flexible tariffs for cargo and parcel traffic. The scheme is expected to be announced by Railway Minister Lalu Prasad in the Rail Budget.

As per the scheme, specified routes or empty flow directions will be notified and tariffs will be determined through bidding.

Officials said as market forces were not taken into account while fixing tariffs, railway capacity was often underutilised, which led to loss of potential revenue.

Flexible rates will also prevent the diversion of traffic to roads that leverage the advantage of transporting goods at flexible rates.

At present there the rates are set for all routes and the same rate is applicable for to and fro journeys. Officials said on routes like Delhi-Guwahati, there was enough traffic for one way but rakes often returned empty.

The move to introduce flexi-tariffs will mark a shift in the approach  --  from generating revenues by increasing tariffs to using more market-oriented measures.

For parcels, a uniform rate is charged in passenger and express trains. As a result, there are hardly any takers for slower trains. Even in the case of mail express, premium trains get a preference.

In premium trains like the Rajdhanis, the luggage carrying van goes empty as same rates are charged.

The railways had rationalised parcel rates in the Budget last year, hoping to garner an additional revenue of Rs 50 crore (Rs 500 million).

Officials, however, said the railways continued to incur losses of about Rs 700 crore  (Rs 7 billion) annually in the parcel segment.

Railways will set the reserve price, which equals the earnings during the past year plus an incremental earning factor, above which bidding will occur. In the case of passenger trains, the floor price can be lowered if no takers are found in the previous round of bidding.

The change in parcel tariff structure will help the railways win more business from courier companies that will otherwise shift to roads.