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Why taking a train could soon become an expensive affair

Indian Railways’ passenger fares have always been heavily subsidised. And while passenger revenue has been hit with Covid crippling operations, even freight fares, which offset the lower passenger fares, have been reduced.

October 22, 2020 / 02:01 PM IST

Taking a train may cost you more soon, as several policy decisions by Indian Railways (IR) could lead to an escalation in fares.

Take the policy on private trains, for instance, where operators will be free to fix fares without offering existing concessions. Since the services offered on these trains will be better, the fares are expected to be higher. In addition, new levies on train travel are likely in the form of user fees for access to major railway stations.

Higher charges may also have to be paid for platform tickets and to use other station facilities, such as parking facilities. Already, festival special trains being run by Indian Railways (IR) are charging fares that are up to 30 percent higher than base fares, as IR has suspended most of the concession schemes earlier applicable for such trains and regular train services anyway remain suspended.

A subsidised affair

Amid all these future fare escalations, though, one shouldn’t lose sight of the fact that travel on trains in India has historically been heavily subsidised, with IR transporting each passenger at a loss.

And the levies, higher fares etc, which are a consequence of private train operations, redevelopment of big railway stations and withdrawal of concessions for festival special trains, are unlikely to make IR’s passenger business profitable anytime soon.

Close

It is also pertinent to note here that while it has been slowly eyeing some upside in passenger earnings, IR has also simultaneously dropped fares for freight transportation. Earnings from freight have almost always cross-subsidised passengers, so perhaps it is in the fitness of things that freight rates are going south, while passengers may be expected to shell out more.

The Opposition is already up in arms against the higher festive fares and the prospect of train travel becoming more expensive. Congress spokesperson Gourav Vallabh tweeted: “Modi Government is Denting the Festive Spirits for Common Man - Government should roll back the increased fares for Festival Special Trains”

Vallabh said fares were up to 30 percent higher. For example, the lowest sleeper fare was Rs 650 against Rs 510 earlier, an increase of over 27 percent.

An IR spokesperson termed the news of hikes in passenger fares during the festival season “misleading and erroneous”, citing a 2015 policy on fares for Special Trains. The spokesperson said such trains, run during festivals and the summer holiday season, are special fares and fixed at the rate of 10 percent of basic fare for second class and 30 percent of the basic fare for all other classes. He added that despite these special fares, IR “still bears a significant amount of financial burden for each passenger that travels”.

Ajay Shukla, former Member (Traffic) on the Railway Board, said that while higher fares were necessary, there must also be a discussion on IR’s inefficiencies. “Indian Railways is the most inefficient system world over. It incurs heavy expenditure on staff and materials so that value for money for passengers is affected,” he said.

“Already, AC 2 fares are comparable to air fares on some routes. Also, while cross-subsidisation needs to be lessened, goods carriage by IR is also inefficient and costly. So, while a fare hike is desirable, zero-based budgeting is first needed to monitor IR’s expenses,” said Shukla.

Private trains

IR is already in the process of awarding select populous train routes to private operators and the operators will have complete freedom to fix fares. The motive behind inviting private participation in train operations is enhanced investment and technological progress without the national transporter having to invest incremental amounts in the process.

Since the private operator will bag the contract to run trains on these routes based on how much revenue it offers to share with IR, it is reasonable to expect that the fares will be higher than those being currently charged. However, IR has maintained that regular trains will continue to be operated on these routes and passengers will have the option of choosing a type of service and fare. In any case, private trains are initially to be operated only on 109 routes, a fraction of the entire network.

User fee

The Preliminary Information Memorandum (PIM) for redevelopment of the New Delhi Railway Station, one of the biggest in the country, speaks of two different levies on passengers. Under the heading ‘user charges’, it speaks of payment to the concessionaire on a “per-passenger basis for every passenger handled at the station.” The approved tariff for this passenger handling fee will be pre-decided and notified by IR. The passenger fee for transit passengers shall also be similarly decided by IR.

The second levy proposed is for visitors, platform ticket holders and those parking vehicles at railway stations. The platform ticket amount will be fixed by IR, whereas the parking rates will be as per the concessionaire.

A senior official closely involved with the redevelopment of railway stations said there was no proposal for two levies and only a single user fee would have to be paid, which is pre-determined. Another senior IR official had earlier said that the per-passenger user fee to access stations would be nominal and would be pre-determined.

Shukla pointed out that platform ticket and parking charges are justified. “The habit in India is that for every passenger, four attendants also reach railway stations. This causes rush and inconvenience. Nowhere in the world are people without valid tickets allowed on platforms,” he said.

“Then, parking is anyway becoming costly everywhere since space is limited….in any case, platform ticket earnings are a very tiny part of IR’s total earnings but can act as a deterrent for loiterers. The elephant in the room is enforcement, since most railway stations have multiple entry points with beggars, vendors and hawkers at platforms,” Shukla added.

Earnings

The first half of FY21 has been especially tough for IR due to the severe restrictions on rail travel and a simultaneous decline in freight-loading during the lockdown. Railway Board Chairman VK Yadav had said last week that IR’s revenue had declined substantially during the lockdown and an improvement has been seen only since September.

“We now believe freight revenue will surpass last year’s while passenger revenue will be less than last year. We are trying to control expenditure since regular passenger trains have not been running. Expenditure on fuel, maintenance and on inventory is being reduced,” said Yadav.

“So, whatever we lose in passenger revenue, IR’s operating ratio will not worsen because freight revenue will increase and expenditure will also be lower. The passenger revenue loss will be made up,” he added.

As per the latest IR data, revenue from passenger operations is still down by almost 90 percent year-on-year though the decline has narrowed substantially in the last one week at -37 percent. IR earned just Rs 2,245.03 crore between April 1 and October 20.

Earnings from freight, however, have grown significantly since last month. In the first 20 days of October, earnings, at Rs 6,830.72 crore, are 7 percent higher than in same period last year. Even year-to-date, the decline is only about 15 percent now.

Sindhu Bhattacharya is a journalist based in Delhi who writes on a range of topics in business and economy.
Sindhu Bhattacharya
first published: Oct 22, 2020 01:26 pm

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