Cost push effect of freight increase in basic commodities could have an inflationary effect

Chennai:

The Madras Chamber has hailed railway budget for announcing Rs 2,000
crore coastal connectivity programme but warned that the cost push
effect of freight increase on basic commodities like iron and steel,
cement and coal could have an inflationary effect.

Observing that while there were not much of figures in the main
presentation of the budget, K Saraswathi, secretary general of Madras
Chamber of Commerce and Industry stated that the devil or divine could
be in the details.



Raising concern over cross subsidizing the passenger fares by freight
cost, she said that while the budget is a passenger friendly budget,
the cost push effect of freight increase in basic commodities could
have an inflationary effect.



The Madras Chamber in a release also stated that the increase in urea
freight will swell the subsidy kitty and affect the cash flow of the
fertilizer companies.



It also questioned the announcement over States’ investment in
Railways. “The question remains whether the States will come forward,
given their limited resources and other priorities,” the chamber
reasoned.



“No doubt, the Railways have to go through a transformation, and this
budget could be one step in that direction. But a lot needs to be done
and more concerted efforts and clear action plans on fund raising and
timelines are required” said J Krishnan, chairman, Logistics Committee
and member, General Committee of MCCI.



The chamber also stated that while the non-increase in passenger fares
is on expected lines, no big ‘ticket’ items like no new trains or
other major plans have come as a surprise.



However, it hailed the rail budget for its focus on cleanliness
,safety, passenger amenities and transparency and governance.



It welcomed proposed improvement in operating efficiency and ratios
but stated that though a major portion of that could be the result of
falling fuel prices.



Simplifying the wagon leasing scheme, setting up the Logistics
Corporation of India and for the first time expansion of freight
handling through integration with port and air cargo from Inland
Container Depot is spoken about, the chamber said.



It also welcomed the plan to set up of infrastructure fund with joint
venture besides setting up of an independent regulatory board on
performance benchmarks and tariffs.