The Railways have decided to increase the freight rates for coal, iron ore and some other items effective from Saturday to mop up Rs 400 crore (Rs 4 billion) for the current year in a bid to partially offset the additional burden on account of hike in the prices of diesel and steel.

"Freight rates for coal, iron ore, limestone, dolomite, gypsum, bauxite, manganese ore, cement and clinker have been increased from November 27," a mid-term revision of rail freight classification said on Thursday.

The freight rates for coal, iron ore, manganese ore and clinker would be higher by 7.7 per cent, while those for cement would be higher by 3.7 per cent.

These adjustments in freight rates were estimated to yield an additional revenue of the order of Rs 400 crore for the remaining period of 2004-05 to offset partially the additional burden of the fuel bill and steel prices, it said.

"There has been no across-the-board increase in freight rates by the Indian Railways for the past three years. Railways have so far been absorbing fully the increase in the fuel bill and other working expenses," an official release said.

Observing that Railways are one of the largest consumers of high speed diesel and steel, consuming over 2,000 million litres of diesel and nearly 1.4 million tonnes of steel every year, the release said the impact of the three hikes in the diesel price on the fuel bill of the Railways has been around Rs 540 crore (Rs 5.40 billion) during the current year.

"Impact for the next year is estimated to be around Rs 940 crore (Rs 9.40 billion), provided there is no further increase in diesel prices," it said, adding that the steel industry had also hiked prices repeatedly and the expenditure of railways on purchase of steel and wagons has increased significantly.

There has been an unprecedented demand for transportation of iron ore for export and the classification of finished iron and steel was reduced from class 190 to class 180 in 2003-04 thereby reducing the freight by 5.3 per cent, it said.

Noting that the increase in the freight of one tonne of iron ore at an average lead of around 386 kilometres would be only Rs 48.60 per tonne, it said the effect of increase in the iron ore freight would be only around 0.30 per cent on the price of one tonne of finished steel.