Report No. 14 of 2015 - Performance Audit on Dual Freight Policy for Transportation of Iron Ore Traffic in Indian Railways Union Government,Railways

Date on which Report Tabled:
Fri 08 May, 2015
Date of sending the report to Government
Government Type
Union Department
Transport & Infrastructure


Iron ore is an important commodity transported by Indian Railway (IR). A considerable share of total Iron ore consumed in India and exported from India is transported by IR. It is loaded mainly from 97 loading points over seven Zonal Railways.In IR, rate for charging freight for a commodity is decided on the basis of Goods Classification where in a class is assigned to each commodity. The freight rate applicable to that class is charged for all commodities included in that particular class. Taking into account the socio-economic and commercial factors2, IR also specifies, for the same distance and quantity, higher and lower rates for transport of same or various forms of a particular commodity.

With regard to Iron ore IR introduced with effect from 22 May 2008 the Dual Freight Policy (DFP) as per which transportation of Iron ore was categorized in two categories viz. for 'domestic consumption' and 'other than domestic consumption'. The above classes covered various types of Iron ore3. The DFP in effect led to freight difference between the above two classes, which was on an average more than three times.

The primary objectives of the DFP were to lower the cost of transport of Iron ore for domestic producers and to keep freight charges for export of iron ore in sync with its rising international spot market prices and garner high freight revenues in the event of increase in international price of Iron ore.

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