Every Re 1 hike in diesel to cost Railways Rs 234 cr annually

Every Re 1 hike in diesel to cost Railways Rs 234 cr annually

New Delhi, Feb. 4
Indian Railways – the single largest high speed diesel consumer in the country at 2.35 billion litres a year – will have to take a hit of about Rs 234 crore annually for every one rupee increase in price of diesel.
So, with less than two months remaining in the current fiscal, the Indian Railways is unlikely to be hit in any significant manner.
The committee, headed by Mr Kirit S. Parikh, on “A viable and sustainable system of pricing of petroleum products”, has suggested complete deregulation of the petrol and diesel prices.
At the current international crude oil prices, the diesel prices will go up by Rs 3-4 a litre if the recommendation is accepted.
Traffic earnings
The total annual traffic earnings of the Railways are almost Rs 80,000 crore, with an annual diesel consumption expense of almost Rs 8,000 crore.
So, the exact extent of the hit to the Railways’ bottom-line will depend on the extent to which the Railways pass on the expected hike to its freight and passenger services.
Specifically, the Railways mopped up Rs 79,862 crore in 2008-09 as traffic receipts. “In 2008-09, the Railways consumed 2.35 million kl of high speed diesel.
It had a bill of Rs 7,996.81 crore in the financial year on account of high speed diesel consumption,” said a Ministry official.
The per litre high speed diesel price of the Railways is linked to the price at which the oil marketing companies supply the fuel to their retail outlets.
So, each increase in retail price is passed on to the Railways proportionately.
On account of being the single largest consumer, the Railways usually receives a discount – the level of which is agreed upon between the oil marketing firms and the Railways through a bidding process.

http://www.thehindubusinessline.com/2010/02/05/stories/2010020551530500.htm

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