Rail Freight Hike to Push Fertiliser Subsidy by Rs 200 Crore: Industry Body

Fertiliser subsidy bill will rise by about Rs 200 crore annually but will not have an impact on retail prices following the government's decision to hike rail freight by 6.5 per cent, industry body FAI said on Friday.

"With this latest hike of rail freight, the fertiliser subsidy bill is estimated to increase by about Rs 200 crore," FAI director general Satish Chander told PTI.

Every year about 44 million tonnes of fertilisers, including both urea and P&K fertilisers, is moved through the country. Out of this volume, 80 per cent is moved through rail and the rest via roads.

Government in the interim budget had fixed the fertiliser subsidy at Rs 67,970 crore for the financial year ending March 2015 as compared to the revised estimate of about Rs 67,971 crore in fiscal year 2013-14.

In a pre-budget move, cash-strapped railways on Friday effected a steep across-the-board hike of 14.2 per cent in passenger fares in all classes and a 6.5 per cent increase in freight rates to garner Rs 8,000 crore a year. (Read full story)

Primary freight, which is paid on movement of fertilisers from one city to another city, is passed through and paid as freight subsidy, so there will be no increase in prices. Meanwhile, the rail freight hike will come into effect from June 25, 2014.

Announcing the decision, less than a month after the NDA government took over, Railway Minister Sadanand Gowda said, "I was forced to implement the order that was done by my predecessor. I am only withdrawing the withholding order."

The Railway Budget will be presented in Parliament in the first week of next month.