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IRCTC mulls hard decisions on unprofitable trains

In 2019-20, the year before COVID-19 hit, tourism brought in over 13 per cent of the company’s revenues.

November 12, 2021 / 01:45 PM IST
IRCTC has approached the railway ministry to seek waiver of costs that the public sector unit pays to Indian Railways to park its trains on the railway network and get them maintained. [Representative image]

IRCTC has approached the railway ministry to seek waiver of costs that the public sector unit pays to Indian Railways to park its trains on the railway network and get them maintained. [Representative image]

 
 
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Indian Railways Catering and Tourism Corporation (IRCTC) is poised to take a few realistic decisions on some of the underperforming trains it operates including discontinuing the most unprofitable ones.

The listed public sector undertaking (PSU), which offers ticketing, catering and tourism services to the Indian Railways, has informed its parent ministry that it cannot operate the Kashi Mahakal Express, one of the three private passenger trains it had started running before the pandemic struck to connect various tourist places, particularly religious ones in Uttar Pradesh and Madhya Pradesh. IRCTC is also weighing different options including a few hard-nosed calls for the Tejas Express, the first privately run passenger train in the country that was launched with much fanfare in 2019. It has sought compensation under the force majeure clause for the time it did not run trains. An email sent to IRCTC remained unanswered.

Rationalising train operations

“There was a dearth of passengers on Mahakal routes, and we informed Indian Railways about three months back that under existing conditions, it would be difficult for us to operate that train,” an official in the know told Moneycontrol. The Kashi Mahakal Express, the third privately operated train of Indian Railways, began its commercial run in February 2020, a month before COVID-19 hit Indian shores and forced IRCTC to stop its operations.

Passengers travelling on this train could visit the three pilgrim centres—Omkareshwar (near Indore), Mahakaleshwar (Ujjain) and Kashi Vishwanath (Varanasi) —and IRCTC had expected bookings to take off on the basis of demand for religious tourism, before the pandemic marred all plans. The tourism, travel and hospitality sectors was one of the first and worst affected by COVID-19.

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Hard look at Tejas

IRCTC is also exploring some difficult decisions around the Tejas Express, one of the few semi-high-speed express trains. Among other routes, IRCTC operates Tejas between New Delhi and Lucknow, and Mumbai-Ahmedabad, where it faces fierce competition from flights, according to officials in the know. “The management has decided to take a tough call on Tejas Express,” Rajni Hasija, IRCTC chairman and managing director, told investors in a call last week. While Hasija did not divulge the nature and extent of the decisions, options may include lowering the frequency of running this train and looking for other partners to manage train operations with lower costs, among other possibilities.

Tejas Express, the operations of which IRCTC restarted in August this year, has largely seen low occupancy barring a few exceptions in the run-up to Diwali, when passenger traffic rose, the official pointed out. Tejas Express needs to have over 70 percent occupancy to turn profitable. During the pandemic, there were several occasions when IRCTC had to discontinue services of the train because of low traffic.

Additionally, IRCTC has approached the railway ministry to seek waiver of costs that the public sector unit pays to Indian Railways to park its trains on the railway network and get them maintained. This sum is called fixed haulage charges in railway jargon. IRCTC has also sought waiver of lease charges for these trains evoking the force majeure clause citing the huge drop in passenger traffic during the pandemic. In some of the previous pandemic-hit quarters, Indian Railways had forgone fixed charges for the PSU. That said, the decision on waivers Indian Railways takes for IRCTC is likely to have a strong bearing on what the ministry will have to do for several other trains that state tourism boards operate.

The first Tejas Express service of IRCTC, on the Lucknow-Delhi route that started from October 2019, had seen a good run in the first few months, mopping up Rs 15 crore revenue in three months, according to an estimate shared by the then PSU management in one of its investor calls. It was close to breaking even in the first quarter. However, it started seeing a dip in passengers from January 2020 onwards, two months before mid-March when passengers further dwindled and the services had to be stopped in the wake of the pandemic-prompted state and national lockdowns.

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The second Tejas Express service on the Mumbai-Ahmedabad route started from January 2020 and was seeing higher occupancy than the Delhi-Lucknow route. To be sure, the PSU didn’t get a full normal year to operate the trains.

Tourism muted for IRCTC and the world

While the PSU doesn’t share an exact breakup of train-wise financials, its CMD told investors last week that excluding Tejas Express, its tourism segment would have booked profits in the quarter ended September. Tourism’s contribution slipped to about 6.5 per cent—lower compared to pre-pandemic times—of the company's quarterly revenue that stood at Rs 404.9 crore.

In 2019-20, the year before COVID-19 hit, tourism brought in over 13 per cent of the company’s revenues.

“The tourism segment, which has been the most hit by the pandemic for us as well as the entire industry, has continued to see muted revenue,” Ajit Kumar, chief financial officer, IRCTC told analysts last week.

Domestic tourism is now seeing high demand and is a focus area for IRCTC. In the June-September quarter of the present fiscal, IRCTC started offering tourist packages covering places of religious and tourist interest like Badrinath, Dwarka, Rameswaram, locations in the Northeast, Ladakh, Leh and Kerala, as well as others in the domestic circuit with an eye on demand and the spread of the virus. Before starting regular service of its luxury train operation (which attracts a lot of international tourists), IRCTC is starting some domestic charter services in the luxury segment that allows a group of people to book a train, according to officials.

Traditionally, IRCTC has offered tour packages services in the domestic sector, as well as international inbound and outbound sectors in the form of train-based, flight-based, and some cruise ship travel to tourist destinations, along with hotel stays and local travel. Its services are designed to suit various pockets, from budget travel to luxury trains like the Maharaja Express.
Mamuni Das is a senior journalist based in New Delhi.
Tags: #IRCTC
first published: Nov 12, 2021 01:45 pm
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