Minister of Railways – LONG TERM TARIFF CONTRACTS/AGREEMENTS
In compliance of announcement made by Minister of Railways in the Railway Budget 2016-17, it has been decided to launch the policy of Long Term Tariff Agreements/ Contracts with Railway’s key freight customers using pre-determined price escalation principle.
• Long term Gross Freight Revenue (corresponding to Minimum Guaranteed Quantity) commitments from customers at pre-determined price escalation principle.
• Grant of incremental Gross Freight Revenue (GFR) linked and absolute GFR (corresponding to gross volumes) linked discount to customers
The main features of the policy are :
• Minimum Guaranteed Volume linked discounts on the basis of incremental growth in Gross Freight Revenue in return for commitment to provide Minimum Guaranteed Quantity of traffic.
• Discounts range from 1.5% to 35% as per the incremental growth in GFR.
• Customers are required to offer at least one million tonne traffic per annum.
• Minimum period of agreement shall not be less than three years and at stretch not more than 5 years.
• New customer will have to offer more than 3 million tonne traffic during the agreement period and one million traffic in the first year itself.
• In case of customers already offering more than 5 million tonnes of traffic discount would be granted on the basis of absolute GFR corresponding to the total volume of traffic offered by the company during the previous 12 months subject to the same GFR being maintained over the period of the agreement.
• The discounts range from 0.5% to 5% according to the volume of traffic.
• The customers already offering more than five million tonne of traffic can avail both discounts also subject to fulfillment of conditions.
• Excluded commodities: All commodities below Class-100, Coal & Coke, Military traffic and RMC.
• Under the pre-determined price escalation principle, any increase or decrease in freight rates will be implemented from the beginning of the next year of the agreement only.
• Discount in freight under this scheme will be given as refund within 45 days.
• Agreement will be signed at Zonal Railway level.
• In case of multi zone operations of a customer, the agreement will be signed with that Zonal Railway which deals with maximum traffic of that customer.
• Customer can opt for single zone or multi zone agreements or both.
• Key customers such as cement, fertilizers, steel industries etc.
• Stability and Certainty of long term tariff/freight rates to the customers
• Assured supply of wagons/rakes to the customers through preferential traffic order (PTO).
• Incremental guaranteed volume of traffic and GFR to Railways.