Economic Highlights

New Delhi, 12 January 2013

Rail Fare Hike

VEILED ONGOING PROCESS

By Shivaji Sarkar

The Indian Railways is indeed unique. Its testimonials should be taken with a pinch of salt. The latest being on the recent fare hike—yet another misstatement. The fare rise says the Railways is being done for the first time in a decade. However, the truth is it is a continuous process.   

The Railways has been tweaking fares almost every year-- even when inimitable Laloo Yadav as minister announced a supposed cut in some areas, which were never effective.  He had even announced a lean period fare, which too remained on paper! Likewise, Dinesh Trivedi’s fare hike was not fully rolled back as the AC class tickets had increased by over 20 per cent-- from 15 paise to 30 paise a km.

This time around, Minister for Railways Pawan Kumar Bansal has done a first too. The fares have been raised just a month before the Railway Budget-- undoubtedly unprecedented. Sadly, the Budget has become a virtual mockery and the secrecy shrouds nothing. In reality, it is the second hike within a financial year, thereby reducing the Budget to a statement of accounts, with increase in taxes, fares or charges made either before or after it. This arrangement calls for serious introspection. Should we treat the Budget presentation as solemn business of inspecting accounts critically or concealing facts?

The recent fare hike is to fetch Rs 6600 crore a year for the Railways. Of this, as per its own estimate, almost Rs 1000 crore is to be collected from approximately 200-300 million persons visiting the Maha Kumbha Mela at Allahabad-- January 25-March 10. Other than the 20 per cent fare hike to be realized from this, the Railways is also making them pay a Kumbha Mela surcharge of Rs 5 per ticket. Over 99 per cent of those who go to the Mela comprise the extreme poor and it’s tragic that the UPA-II has found a novel way to fleece them.

Recall that in 2008, Laloo had abolished the benefit to long distance travelers if they changed a train. Thus, a person travelling from Gwalior to Ranchi with a change of train at Gomoh station had to shell our Rs 15000 instead of Rs 1200 in AC 3 tier.  

Besides, the platform ticket which used to cost Re 1 is now Rs 5. Also, in the past eight years, superfast train charges have been increased intermittently, with the hike ranging from Rs 10 for IInd class traveler to Rs 50 for AC Ist class. Worse, most mail express trains now have been included in the superfast fare structure, with the Railways choosing not to give a separate statement of earnings from these.

Additionally, three years ago a new component has been surreptitiously added to the fares under the title: safety surcharge. It ranges from Rs 10 to Rs 50 in different classes for a travel up to 500 km and is Rs 20 to Rs 100 beyond that.  This too is not mentioned separately in the ticket but included in the computation fare. Besides, over 40 per cent tickets now are reserved for Tatkal (immediate) booking, which helps the Railways rake in almost double the revenue of a normal ticket. However, the Railways keeps it a secret.

Thus while the Railways is earning an increased revenue of over Rs 3000 crore per year at the minimum through various surcharges, Bansal’s statement claims it in losses! The fact is that the Railways is totally mismanaged. For one, it has more officers, who are not required, than the operational staff and it economises on the essential gangmen, who run the system and safai karamcharis (cleaning staff). Even the Standing Committee on Railways does not agree that it is running into ‘actual’ losses.

What it doesn’t realise is that its poor management is leading to an increase in operating ratio (the sum spent to earn Rs 100) which has come under severe strain in the past two years. It has crossed to 95 per cent as against the 92 per cent estimated in the Budget. Losses in the passenger segment, which were Rs 6,159 crore in 2004-05 had risen to Rs 19,964 crore in 2010-11 (18 per cent per annum) and are expected to increase to Rs 25,000 crore in 2012-13, claims Bansal.

However, the calculations are hypothetical. These are based on the supposed increase in income. In 2011, when then minister Mamata Banerjee presented the Budget, the Railways projected revenue target was Rs 94,765 crore and its total earning stood at Rs 67,880.82 crore. As a result, the Railways projected the “shortfall” as losses. However, in March 2012 her successor Trivedi estimated a surplus of Rs 1,492 crore.

Clearly, the situation is going awry as the Railways now aims to raise Rs 218,775 crore through extra-budgetary sources to fund the 12^th Plan expenditure of Rs 7.35 lakh crore -- a quantum jump from the Rs 1.92 lakh crore in the 11^th Plan. While the Railways is expecting a gross budgetary support of Rs.2.5 lakh crore during 12th Plan, the Planning Commission and the Government want it to raise the amount. It is a tall order, as it is finally dawning on the Railways that its Plan projections are too ambitious and beyond its capacity.

Thus, Bansal’s move to raise fares and earn Rs 6600 crore a year from passenger category is unrealistic to meet the target. If realised, it would fetch Rs 33000 crore only in five years, thereby leaving a yawning gap, making the 12^th Plan target utopian as even the target for raising 11^th Plan funds could not be achieved.

Importantly, instead of burdening the poor with a fare hike to fulfill its utopian dreams and compensate the not-so-efficient functioning, the Railways should have lowered its targets as there are no actual losses. Moreover, the Railways has not been able to capitalise adequately on alternative means of financing, with the result that only a fraction of the Plan outlay has been financed by the Public Private Partnership initiatives.

The composite index of all the inputs in the Railways (including fuel oil and staff cost) has shot up by around 100 per cent, but the increase in freight has been only 35-40 per cent in the past eight years. According to the 12th Plan Working Group projections the total receipts of the Railways, including Gross Traffic Receipts, are expected to be around Rs 1.18 lakh crore in 2012-13 as against its initial target of Rs 1.32 lakh crore. Besides, its revenue is increasing by around 6 per cent every year only whereas it could come up to 15 per cent if it simply brings down its non-productive expenses, which unfortunately is not happening.

Despite its claim of functioning akin to a corporate, the Railways is being run in the most unprofessional manner with its cost assessments most unrealistic. Till such time the Railways does not tailor itself to realistic situations, the illusory “losses”, would always remain. However, let these not be mounted on the common unsuspecting masses. ---INFA

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