CHINA's powerful National Development and Reform Commission has announced railway freight rates will be increased by CNY0.015 (US$0.0024) per tonne kilometre, or 13 per cent, from CNY0.1151 to 0.1301.
The increase is expected to be a heavy blow to the logistics industry as more than 50 per cent of China's coal is moved by rail, as is a large proportion of its fuel, grain and wood. Seventy per cent of the China's railway revenue comes from freight as passengers are loss makers. 
China's ratio of logistics cost to the GDP is twice of that in the developed countries and has always been a cause of product price increase. For an increase of CNY0.015, if calculated based on a rail car weight of 60 tonnes and a transport distance of 1,000 kilometres, cost will be CNY900 higher. 
The increase will help to ease the loss of the railway business and mitigate its pressure of debt service as well as transferring costs to users, Xinhua said. 
China has been raising rail freight rate on an almost annual basis ever since 2003. The last time was in May last year, when the price was increased by CNY0.01 per tonne kilometre. 
Experts point out that an increase of CNY0.01 can bring over CNY20 billion's revenue to the Ministry of Railways. Now the increase of CNY0.015 might bring more than CNY30 billion, which is surely a great relief to the ministry that is to suffer a loss of CNY8.54 billion after tax and is carrying debt of CNY2.66 trillion with a debt asset ratio as high as 61.81 per cent. 
The Ministry of Railways is facing pressures from lenders who want CNY520 billion this year, which will not be eased by further borrowings and bond issues without strengthening profitability, said Li Hongchang, a researcher from Beijing Jiaotong University. 
Seventy per cent of the China's railway revenue comes from freight and passengers are loss making.
But Bank of Communications analyst Tang Jianwei said the increases will have little effect on the consumer price index (CPI) in a short term because agricultural produce, which has the most impact on the CPI, have become less reliant on rail. 
Li Hongchang said the increase is only CNY0.1301, much lower than road freight rate of CNY0.4 to 0.5. Narrowing the rate gap between rail and road will be an effective way to reduce the reselling of rail capacity. 
Sun Zhang, a professor from Tongji University, said that rail freight rate increase can attract private investors. He pointed out that railway can only cater one third of the cargo transport demand in China, most of them uses road transportation, which is higher in energy consumption, produces greater pollution, takes longer and costs more.