Indian Railways charge less than half of cost from passengers

Govt's refusal to make up for loss via subsidy hurting transporters

The Indian Railways faces flak for lack of quality services. However, a deeper look into the railway accounts reveals that the national transporter is unable to recover more than half the cost of a passenger ticket. According to the latest figures, the railways bear 73 paise in cost for every 10 km travelled, while it only charges 36 paise per passenger.

On an annualised basis, the cross-subsidy for passenger services on suburban and certain non-suburban classes worked out to around 

Rs 353 billion in 2015-16, according to the latest available data. This was an increase of 5.6 per cent over the previous two years.

As part of the cross-subsidising policy, moving freight costs 99 paise per km though it is charged Rs 1.60. “This is not a good sign for the economy as it will lead to an increase in logistics costs, which is already one of the highest in India at 13 per cent of the cost of goods. The railways are losing a lot of traffic to other modes of transport such as road because of high tariffs,” said an official.

The Indian Railways is pinning hopes on the proposed Rail Development Authority (RDA), which is expected to go into tariff determination, ensuring fair play and a level playing field for all stakeholders. “Subsidies are causing distress to the overall working of the railways as it affects a large chunk of their revenues which could be used for developmental works,” said 

R Sivadasan, former financial commissioner of the railways.

Through the introduction of flexi-pricing on premium trains in September 2016, the fares of higher-class trains have shot up. In some sectors, railway fares are higher than air fares. Indian Railways is able to recover costs in upper classes of AC-I, AC-II and AC-III, but non-revision of fares for the lower classes and the government's refusal to make up for the loss through subsidy are hitting the Indian Railways hard.

A parliamentary committee had earlier recommended the Indian Railways to conduct a detailed study and come up with a road map towards gradual elimination of the cross-subsidy. Indian Railways is in talks with a few financial institutes, including the National Institute of Public Finance and Policy (NIPFP), to conduct a third-party study on this. 

The Indian Railways reportedly recovers only 57 per cent on the cost of passenger services, while on suburban services; it comes to around 40 per cent. The subsidy for senior citizens, sportspersons and women is estimated to be Rs 20 billion.

For the financial year 2017-18, the operating ratio of the Indian Railways slipped to 96 per cent. The ratio represents railway spending over its expenditure or what is spent to earn every Rs 100. For 2018-19, Finance Minister Arun Jaitley has projected an ambitious 92.5 per cent operating ratio. Since July 2017, Indian Railways had launched a “Give It Up” campaign through which senior citizens were allowed to give up their subsidy on tickets.

According to the Indian Railways, till November end, 1.14 million passengers have given up their subsidy under the scheme. This include 567,000 passengers who gave up 100 per cent of the concession value and 581,000 who gave up 50 per cent of the concession value. ‘Give It Up’ money is pooled to meet the revenue expenditure of the Indian Railways including the development of railway stations.

Passenger Sops

Non-suburban: 

Concessions to various categories of passengers: Senior citizens, students, recipients of gallantry awards, national sports awardees, participants in national and state sports tournaments, Shram awardees, war widows; patients suffering from cancer, tuberculosis and other serious diseases, handicapped persons, press correspondents and military personnel

Suburban passenger services: 

Fares of various classes of tickets lower than costs; season ticket concessions