The Railway Board on Friday confirmed that the Rail Budget had only reiterated a commitment to the freight marketing incentives already granted to the steel industry in December. The Railways may be instrumental in procuring an excise concession for the steel industry, however.

Both the Union ministries of steel and the Railways are known to have petitioned North Block against a clause in the Excise Act that compels steel companies to pay excise, post freight. The clause, introduced in October 1996, increases the excise burden on steel-makers and discourages them from moving finished steel by the rail route.

The amended excise clause was an attempt by the revenue department to mop up revenue from companies that were offering steel ``off-the-shelf'' to customers, or selling steel directly at the stockyards. The department decreed that excise should be levied ex-stockyard and notex-plant.

Steel companies pay 15 per cent excise ad valorem. Since most steel plants move their finished products to the stockyards by rail, the excise became leviable after rail freight had been paid on finished steel.

Customers moving steel from plant sites, consequently, paid less excise than those who opted to lift steel from the stockyards. The stockyards, set up at considerable costs to promote steel sales, actually became deterrents to sales.

The snag in the excise rules has been debated at length by the committee of secretaries. The panel felt that the clause should be amended and that excise should not be levied post-freight.

The amendment of the October 1996 clause will be a considerable boon for the recession-hit steel industry and should entice them to use rail routes more often. The steel industry contributes to 11 per cent of the total earnings of the Railways from goods traffic.

The recession in the industry has resulted in a steady decline in the Railways' earnings from goods trafficfrom the industry. Between April and November, the Railways' earnings from pig iron and finished steel declined by 7.6 per cent.

To woo traffic, the Railways announced a series of concessions for the industry in December last year. It helped hot rolled coils producers bring down the ``cost of unitisation'' in transporting steel by rail.

The Railways also gave an incentive for bulk traffic by granting a concession for every additional 10 per cent of incremental freight. It gave train load concessions for two-point rake loading.

The package, said the Railways executive director, traffic (freight marketing), U. S. Jha, had already begun to pay dividends. ``Private sector steel producers, like Essar Steel, Jindal Vijayanagara Steels Limited (JVSL) and Lloyds Steel, that tended to move steel on road, are now giving us goods traffic,'' he said.

Jha said companies like Tata Steel and JVSL had already installed steel saddles in wagons meant for transporting hot rolled coils. The saddles have brought down thecost of packing the material into the wagons by almost Rs 150 a tonne of steel.

``We realised that 50 per cent of the finished steel moved by rail was hot rolled coils,'' said Jha, explaining the special marketing focus on the product. Hot rolled coils producers also do not have to pay for idle freight any more.

Rail Bhavan sources said Railway minister Nitish Kumar was only reiterating his commitment to the marketing incentives, when he mentioned a special package for steel. ``What the minister really meant was that the package would continue,'' they said.