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| Type | Commercial Circular |
|---|---|
| Topic | freight |
6.A minimum of 10 wagons should be loaded from each originating terminal.
Freight Incentive Schemes
By
U L N RAO, Sr AFA (T)/Insp
Central Railway
Pricing in Railways : Purpose
• To meet cost of administration
• Maintenance of assets
• Primary Purpose : Train Operations
• Liabilities : Pension, Depreciation
• Profit Margin for Infrastructure expansion
Principles used in Pricing the freight
• Cost of Service principle
• Value of Service Principle
Cost of service & Value of service
• There
aretwo
principleswhich mainly decide the fixation
of railway rates namely :
• Cost of service :
– Such charges must in no case be less than the cost to the railway
management of rendering the required service.
– This should be the lower limit of the freight rate.
• Value of service :
– They must in no case be more than the value of the service to the
customers.
– This should be the upper limit of the freight rate.
Cost Of Service
• No set Formulae for Costing - Not an exact Science
• Collection of Data/Trends - Adjustment to reflect Market
Changes
• Railway Working : Domain Knowledge - Basic
Understanding
• Railways Transport Heterogeneous Goods - Over Different
Distances
• Railways : “Joint Cost IndustryCost of Service must not be
lower than the cost of providing service
• Cost of Service should be the lower limit (Floor) for
determining the freight rates
Factors determining the cost of service:
• Loadability
• Susceptibility of the commodity to damage
• Railway’s liability for claim compensation
• Requirement -Special type of wagons/Special handling
• Size of Consignment
• Type of commodity -damage to other commodities
• Regularity of movement - Empty haulage of Wagons for
providing transport
Value of service
• Enables Railways to try & Realize as much as possible from
margin resulting from
• Transportation from one place to another Augmentation of
value consequent to transportation
• Value of service must not exceed value of service to the
customers
• Value of service should be the upper limit (Ceiling) of the
freight rate
Factors determining value of service
• Value of the commodity at the destination as compared with
the value at the originating station
• Competition from other modes of transportation Potential
competition from new sources of production and new markets
• Classification of comparable and related commodities
Incentive Schemes
• Direct incentives on Freight Transactions
• Incentives on various Transport Products
• Investment linked incentives
Direct incentives on Freight Transactions
• Incentive Scheme for Loading Bagged Consignments in
Open & Flat wagons
• Incentive Scheme for Traditional Empty Flow Directions
• Incentive Scheme for Freight Forwarders
• Incentive Scheme for Incremental Traffic
• Station To Station Rates
Incentive Scheme for Loading Bagged Consignments
in Open & Flat wagons
• Normally, bagged consignments take a longer time to load in Open and Flat
wagons and also need to be covered with tarpaulins. In addition to above,
in some cases their loadability is also less. This Scheme aims to facilitate
such loading.
• Minimum chargeable freight after all concessions should not be less than
NTR of Class LR-1.
• Lead Restriction: Not less than or equal to 100 kms.
• Permitted Wagons: Open and Flat wagons.
• Concurrent Freight Concessions: Freight concession under following Schemes
will be permitted concurrently with concessions under this scheme.
(i) 6% concession to and from North East.
(ii) Incentive scheme for Traditional Empty flow Direction.
(iii) Incentive scheme for Incremental Traffic.
Automatic Freight Rebate Scheme for traffic loaded
in Traditional Empty Flow Directions (TEFD)
• Discounted freight is charged at Class LR 1/Class 100/Class 110
for train load/wagon load respectively, if traffic is booked in
notified empty flow directions. Discount is granted through
system.
• Commodities restricted. Other than Iron ore, Coal, Coke,
Chemical manures, POL, RMC, Military traffic.
• Lead less than 100 km not eligible.
•
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