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Sharp rise in freight traffic on railways

by Mahesh Vyas

Railways reported an excellent increase in revenue earning freight traffic during April 2018. Year-on-year, freight grew by 8.3 per cent. This is the best monthly y-o-y growth seen since October 2014.

After nearly two years of stagnation, freight movement on railways had started rising from October-November 2016. Freight traffic increased by 4.8 per cent from 1.11 billion tonnes in 2016-17 to 1.16 billion tonnes in 2017-18. This was a major improvement over the preceding two years’ 0.8 and 0.4 per cent growth and also the average 4.2 per cent growth seen in the preceding three years.

The over-8 per cent growth in April is therefore a substantial improvement in freight movement in the country and it indicates that the acceleration that began in 2017-18 could continue into 2018-19 as well.

Of all the freight traffic on railways, coal is the largest commodity. It accounts for about 48 per cent of all freight traffic on the tracks. Iron ore is a distant second with a share of about 12 per cent. Cement accounts for another nearly 10 per cent. These three commodities together account for about 70 per cent of the total freight movement over railways.

Coal movement has been growing well in recent months. In April 2018, its traffic was 18.4 per cent higher than a year-ago. In March, it was 10 per cent higher in similar comparison. These growth rates are much higher than seen anytime in the past over-three years. Most of the coal is headed for thermal power plants. In spite of the increased traffic of coal for thermal plants, reports suggest that power plants are starved for coal.

Traffic of iron ore has been falling. In April 2018, it was 10.7 per cent lower than its year-ago level. Iron ore traffic was similarly lower than the corresponding month a year ago in six of the past seven months. This reflects essentially a steep fall in the traffic for iron ore exports and also low offtake for domestic applications other than in steel plants.

Rail traffic of iron ore for steel plants has been growing handsomely. This matches with the equally handsome growth seen in rail traffic of coal for steel plants. Railway movements therefore seem to suggest that steel production is growing well.

However, the traffic of pig iron and finished steel from steel plants itself is not growing. Compared to a year ago, steel traffic from steel plants was down in each of the past five months. At the same time, steel “from other points” is moving quite well on railways. This is growing at between 15-20 per cent in y-o-y comparisons.

Cement traffic growth has marginally increased. In April 2018, it was 0.2 per cent higher than its level in April 2017. In March, it had declined by 1.2 per cent.

The fall in rail movement of steel and cement could suggest a slowing down of the recent growth in industrial production. Ports traffic available till March 2018 also indicate a fall in cement, iron ore and steel traffic.

But, the sharp acceleration in coal offtake and also in the overall freight traffic show that such an inference could be too hasty at the moment.