Advance Goods-Theory of Rates

In the principle of rating

In the principle of rating and classification the following are taking into account:

a) Cost of service

b) Value of service

c) What the traffic can bear

a) Cost of service:

i. It represents the cost of transportation of a commodity from one place to

another.

ii. It is represented in terms of money per tonne.

iii. Rate fixed must not be less than the freight charges.

iv. Minimum freight charges must not result in loss in the cost of service.

Value of service:

i. It represents the value to be obtained from the service.

ii. It is determined by taking the difference between cost (value) at the place of

production and the cost (value) at the place of consumption.

iii. The difference represents the freight charges to be levied on consignment.

iv. If the difference shows reverse trend, the commodity shall run by alternative

means of transport.

v. The study provides or determines a normal margin of profit

vi. It also ensures provision of expenses incidental to transport

What the traffic can bear:

i. It is somewhat different from the value of service and cost of service.

ii. It represents reasonable freight charges on the commodity

iii. Seller‖s market and buyer‖s market are taken into consideration.

iv. It envisages collection of freight charges lower than the cost of haulage in

certain cases—Low rated commodity