The annual fuel bill of the Indian Railways is set to increase by Rs 560 crore (Rs 5.6 billion) in the remaining 10 months of the current fiscal year in the wake of the Rs 3 per litre hike for diesel announced on Wednesday.

Railway ministry officials said the total bill in 2008-09 would increase 7 per cent to Rs 8,560 crore (Rs 85.6 billion) and added passenger fares or freight rates would not be hiked to offset the increase.

In addition, truck rentals are expected to be hiked by around by 5 per cent soon. Private taxis and commercial passenger vehicles are also expected to follow suit.

Currently, the railways' expenditure on account of fuel stands at an average of Rs 8,000 crore (Rs 80 billion) annually. This constitutes over 15 per cent of its total working expenses. Railways, which operate a 63,000 route kilometre (rkm) network, consumes around 2,270 million litres of diesel annually.

A senior railway ministry official said: "Though the hike in the prices of diesel will put an additional burden of Rs 560 crore, the Indian Railways do not have any proposal to increase the freight rates or passenger fares and pass it on to the common man. We are trying to increase our productivity and efficiency, which will compensate for the increased expenditure on diesel."

Increasing electrification is also expected to save around Rs 150 crore (Rs 1.5 billion) annually, officials added. The railways say as on date nearly 18,145 rkm of the 63,000 rkm have been electrified.

However, the hike in the prices of diesel will have an impact on the other modes of transport. The truck rentals are expected to go up by 5 per cent on account of the fuel price rise. The rentals of a 16-tonne truck for New Delhi-Mumbai-New Delhi is expected to increase by Rs 2,000 to Rs 40,700.

SP Singh, senior fellow, Indian Foundation of Transport Research and Training, said: "A hike of Rs 3 per litre should actually effect an increase of 5 per cent in truck rentals. However, in the immediate future, the truck rentals may increase only 3 per cent as the growth in the cargo is lacking pace with the growth in the number of trucks".

However, the shipping sector does not see any impact due to the price hike. Shipping Corporation of India [Get Quote] Chairman S Hajara said, "Shipping freight rates are largely impacted due to global factors than the local issues.

"Most of the ships do their bunkering abroad and a domestic fuel price hike may not have any major impact on the shipping freight rates. There is no co-relation between domestic fuel price hike and freight rate hike and it all depends on the demand supply factor."

Inflation, the silent killer