Lower fuel bill seen after APM is dismantled

Partha Ghosh and Gaurav Raghuvanshi

The dismantling of the administered pricing mechanism coupled with technological innovations may help the Railways contain their fuel bill. As the single largest consumer of high speed diesel in the country, the Railways hope to leverage their position to get discounts in the libralised oil regime.

The ministry of petroleum as well as the Indian Oil Corporation have also found that oil can continue to make oil available to the Railways at lower rates since it buys in bulk.

"We hope to contain our consumption of diesel at 2,019 million litres, which is marginally higher than the current year's figure of 2,004 million litres. We normally make enough provision for fuel in our projections, and even this year, we have kept sufficient allocation -- in fact, our allocation is always higher thn what we eventually spend. In the post-APM era, we hope to take advantage of our status as a bulk consumer to procure fuel at competitive prices," a senior Railway official told Business Standard.

The HSD bill of the Railways has been projected to fall nine per cent from Rs 33.61 billion (revised estimates) in 2001-02 to Rs 30.66 billion in the next financial year. Even the revised estimate for the current year is 6.5 per cent lower than the budget estimate of Rs 35.91 billion.

The Railways have based their calculations on the international crude prices of $20 a barrel, which translates into a price of $22 a barrel for diesel. "As per our estimates the intinsric price of oil is Rs 5.75 per litre. We are already paying Rs 17. Can it go up any further?" he asked.

The official also pointed out that oil is the only commodity which attracts all duties such as excise duty, entry tax, customs, central sales tax, state sales tax, etc. "As it is, around 300 per cent of oil price is a component of taxes. In the new regime, these will be factored in," he added.

"Both the Indian Oil Corporation and the ministry of petroleum have promised us oil at low prices. On our own too, we have invested in better technology to bring down our fuel consumption," the official said.

The Railways have invested Rs 920 million to install fuel-efficient kits on their diesel locomotives, which couupled with Rs 1.58 billion investment in upgradation of the new 3100 horse power locomotives, would result in a saving of Rs 4.46 billion over the next five years, he said.

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