Railway Minister Lalu Prasad on Monday announced a 5 per cent cut in freight transportation rates for diesel, petrol and a 6 per cent reduction in all minerals, including iron ore and limestone.

"To maintain unprecedented growth in freight transportation, I propose to reduce the highest class from 220 to 210. This will bring down the freight for diesel, petrol and ammonia by 5 per cent," the railway minister said while presenting his ministry's budget for 2007-08 in the Lok Sabha.

The lowering of freight rates is part of rationalisation of the tariff structure announced by the minister even as he refrained from announcing any across the board increase in freight rates.

On the demand of mineral-based industries like steel and cement, he said freight rates for all minerals including iron ore and limestone will be charged at Class 160 in place of 170, thereby reducing the freight rates for these commodities by about 6 per cent.

Concerned at freight trains returning empty after delivery of goods, Prasad increased the empty flow discount to 30 per cent from the current 20 per cent. This would be effective in peak season also, he said.

"Our goods trains run loaded in one direction and mostly run empty in the return direction. The percentage of empty running is worse in case of open wagons," Prasad told the House.

He announced introduction of a commodity-based tariff policy from April 1 on an experimental basis for major commodities to provide a stronger base to the Railways' competitive capabilities. "We will introduce this new policy through an exclusive package for cement," he said.

• Railway Budget 2007-08: Complete Coverage