The prices of steel and cement are set to go up with the railways hiking freight rates of coal, iron ore, manganese ore and clinker by 7.7 per cent and of cement by 3.7 per cent.

The Steel of Authority of India, the country's largest steel producer, has estimated that the freight rate hike will cost the company an additional Rs 150 crore over the next 12 months. SAIL will shortly take a call on passing the extra burden to customers.

B Muthuraman, managing director of Tata Steel, said the company would be forced to reconsider its decision to freeze prices till March 2005 if the hike was not rolled back.

Essar Steel executives said Thursday's decision had effectively pushed up the freight rates by 15 per cent.

"A month ago, the iron ore classification was changed. This raised the freight rate by Rs 34 a tonne, or 7 per cent. Therefore, with today's increase, freight rates have gone up by 15 per cent in a month. For a company that moves 4 million tonnes of iron ore a year, this will have a serious impact," a company spokesperson said.

Several cement companies Business Standard spoke to said the hike would result in higher prices for customers.

N Srinivasan, vice-chairman and managing director of India Cement, said: "We will be left with no choice but to pass on any additional burden to users. The increase in freight rates of coal, clinker and cement affects the industry at several points."

The Cement Manufacturers' Association has already appealed to the railway ministry to roll back the decision.