Industries in India rely heavily on its 65,000-kilometre-long railway network, as 76 per cent goods are currently being moved via trains. This is why the cost of railway transport is added to the prices at which commodities and food are reaching the consumers. For this reason, Indian railways bringing back the busy season surcharge can lead to changes in prices across the markets.
From October 1, a 15 per cent busy season surcharge will be levied on all commodities, including food and fertiliser, except coke and coal. Automobiles moved in some wagons will also be exempt from the additional amount, which is returning after three years. This comes at a time when the railways have reported record high freight loading for two straight years, and the revenue for that hit Rs 12,927 crore this year, after sustainable growth.
Making up for financial stress caused by high demand
Before being brought back at a time when India is trying to buckle inflation, the surcharge was removed in 2019 with an aim to support the economy. The decision had triggered a surge in the volume of goods loaded onto Indian trains, while reducing cost of transportation. The railways cite financial pressure resulting from higher demand for passenger tickets during the holiday season as a reason for reintroducing the surcharge.
Food prices have already registered an uptick in India over high fuel prices, and this has led to a drop in demand, at a time when the world is gearing up for a recession.
Slowed down by losses?
The railway has been struggling to plug its losses for the past several years, as it suffered a Rs 26,388 crore loss in 2019-20, after which it lost Rs 36,000 crore during the pandemic. Back in 2009 the railways had introduced the busy season surcharge at 5 per cent and 7 per cent for commodities to offset the impact of rising fuel prices. Between 2018 and 2019, it had been raised from 12 per cent to 15 per cent, before being removed.