A further rationalisation of the freight rate for petroleum, oil and lubricants (POL) in the Railway Budget for 2004-05 is unlikely.

This is because, despite the sops announced this year the revenue realisation from this sector has been poor.

The Railways are, however, planning to offer complete logistical support to oil companies in order to increase traffic.

The move to seek alternative ways for boosting POL traffic has been prompted by the 9.35 per cent drop in volume and 11.16 per cent dip in earnings recorded by the Railways in the first eight months of the 2003-04, over the corresponding period last year.

There has also been no response to the Budget initiative of long-term agreements with individual oil companies for further reduction in freight rates if they guarantee additional traffic to the Railways.

"Right now all oil companies have an arrangement that optimises their distribution network. This agreement, with Indian Oil Corporation as the nodal agency, is scheduled to expire at the end of the fiscal. The main coordinator for the Railways is Bharat Petroleum Corporation Ltd, and we expect that some long-term agreements will come through in the next fiscal," a Railway official added.

Railways are also planning to deploy BTPN (bogie type petroleum new) rakes to haul petroleum products from the refinery to the market.

"The dedicated close circuit rakes will evacuate inventory at the production level and also reduce the stock-piling requirement at the supply level. With this, the operating costs at both ends of the market will go down and reliability of supply will be enhanced," a senior Railway official told Business Standard.

The BTPN rakes can move from one destination to another without any technical interference and can have an extended run. At the moment, trial runs on some 30-40 of these rakes were on, he added.

Even though there is no further rationalisation in the offing, sources did not rule out selective freight rate reduction in areas where no pipelines exist.

Officials, however, said the power conferred on general managers in this year's budget to offer concessions ranging from 10-24 per cent on station-to-station rates covered the possibility.

The Railways transported 20.85 MT of POL during April-November, 2003, and earned Rs 1,606.20 crore (Rs 16.06 billion) from it. The year's target of 33 MT is likely to be missed by 5 per cent.

Officials attributed the shortfall to the decline in the consumption of high speed diesel (HSD) in the country, which accounts for 44 per cent of total POL freight of the Railways.

Railway officials, however, said the loss in business was due to the new pipelines -- Mangalore-Bangalore, Kochi-Karur-Coimbatore, Vadinar-Kandla, Mathura-Tundla, Koyali-Navgam, Koyali-Sidhpur and the extension of the Mumbai-Manmad line to Indore -- that have been commissioned this year.