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Shot in arm for iron & steel

New Delhi, Feb. 26: India Inc looked gung-ho after railway minister Nitish Kumar handed them a package of relief that would help them tamp down their production costs.

Kumar desisted from raising freight costs; instead he rationalised freight charges for all short-distance traffic.

He also reclassified commodity categories reducing the total number from 32 to 27. The upshot of all this is that the costs for a large swathe of industries that use cement, iron or steel scrap, pig iron, liquefied petroleum gas (LPG), petroleum coke, and manganese core will go down.

“The railway budget is a shot in the arm for the iron and steel industry where proposed rationalisation of freight structures, reduction in number of classifications and other concessions could make the sector more competitive,” said V. S. Jain, chairman of the country’s biggest steel-maker, Steel Authority of India Ltd (SAIL).

He added, “Indian Railways being a major customer of Steel Authority, the budget will benefit us to the extent of 2-2.5 per cent of the total inward and outward freight.”

“I am very happy with the railway budget,” said B. Muthuraman, managing director of Tata Iron and Steel Company Ltd.

“For the first time in the last few years, the freight rates have not been increased. On the other hand, rationalisation of freight rates will prove to be very beneficial both for industry and consumers. The first quarter of next financial year will itself see benefits being given to them,” he added.

With proposed freight rates for train load booking (at 700 km) of cement prices slashing from Rs 57.88 to Rs 55.81, the industry felt a frisson of what everyone calls the “feel-good factor.”

Kishu Tekchandani, chairman and managing director of Cement Corporation of India (CCI), said, “The reduction of freight charges in cement will definitely benefit the consumers as they will have to pay less price on the freight which is actually recovered from them. Cement is a very competitive market. Therefore, market price and demand will itself take care of things”.

However, despite optimism prevailing in the cement industry — the housing constructions industry believed that the current move was just a drop in the ocean.

Niranjan Hiranandani, managing director of Hiranandani Constructions, said: “We are very happy with the rail budget this year. However, the steps taken are not adequate since India has to meet a target of providing housing shelter to 23 million houses. Though reduction in freight charges is a small step in this direction but it would translate into more housing for lower classes.”

With the iron and steel freight costs proposed to be reduced from Rs 78.55 per quintal to Rs 74.41 per quintal, the automotive industry also sounded fairly optimistic.

Asghar Ali, resident director, Ashok Leyland said: “In all fairness, the reduction in freight cost must translate into some profit for the companies and they will be definitely passed on to the consumers. But this might take a little time due to procedural delays. However, in the second half of 2003-04, we can certainly expect the consumers to see a price-cut in trucks and buses.”

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