A hike in train fares overdue

Former Revenue Secretary D.K. Mittal may well turn out to be the ‘knight in shining armour’,  rescuing Railway Minister Suresh Prabhu by helping him to take some tough and highly unpopular decisions in order to put a brake on the Indian Railways hurtling towards  financial  bankruptcy.

Advertisement

Realising that the Bibek Debroy committee on railway reform and restructuring set up last  year may take quite some time to come up with a set of  its recommendations and  pressed for urgent inputs for his forthcoming maiden rail budget,  Suresh Prabhu ordered a new high-level committee on improving the financial health of the Railways which has fortunately recommended what in any case he was planning to do.

At present the average revenue per passenger  km for ordinary second class is a mere  13.80 paise, 14.54 paise for suburban trains, 27.47 paise for second class Mail /Express and 109.47 paise for upper class, making the Indian Railways perhaps the cheapest rail transport system in the world.

A hike in passenger fares has  long been overdue, what with the successive railway ministers over the last two decades steadfastly refusing to bite the bullet.  The Mittal committee has recommended an empowered committee to be set up for reviewing  passenger  tariff with an objective of achieving  the recovery of at least the cost of operations.

A policy framework where fares can be increased at 25 per cent of the consumer price index announced by the RBI on a quarterly basis, and a 2 paise per km  hike for  second-class fares, including the suburban and inter-city trains till the break-even point is reached,  has also been suggested.  

These hikes, somewhat on the lines of the petroleum products, which saw a gradual increase in petrol and diesel prices by almost 40 per cent over  the last three years, reducing the losses suffered by petroleum companies,  would  do the same for the rail passenger segment,  which was  10 paise per km  in 2000-01 and had ballooned to 23 paise in 2012-13.

In just 23 days the committee with representatives of some of the big names in the corporate  management world viz. KPMG, McKinsey & Company, Ernst & Young and Boston Consultancy Group India Ltd., and a few  highly successful railway PSUs viz.   IRCON, RITES and CONCOR on board, has come up with hundreds of short and long-term suggestions.

It also met and interacted with dozens of stakeholders, including Coal  India, SAIL, NTPC, FICCI, CII, ASSOCHAM,  Ministry of Commerce, CRIS (Centre for Railway Information Services), IRCTC ( Indian Railway Catering & Tourism Corporation), RVNL (Rail Vikas Nigam  Ltd) and Railtel, for critical inputs.

However, with a rather short time frame at its disposal and the extensive canvas to be covered,  the committee has ended up  with mainly the wish list of various stakeholders.

Its recommendation that “No expenditure should be allocated for any project till it has passed through the critical evaluation scrutiny from the point of view of viability and prioritisation” is a basic necessity for ensuring the financial health of any organisation, but had  in the past been  routinely ignored by  some of the railway ministers who called these unviable projects  as ‘socially desirable’ for which, in their opinion, such a scrutiny was not  mandatory.

It is now for the Railway Board and ultimately Suresh Prabhu to sift through the  long list of  proposals and decide what is implementable and at what cost, so as to  get the maximum bang for their bucks.

However, one of the most significant recommendations is the urgent  need  for the completion of 24 corridors and seven feeder routes, about which Railway Board mandarins have been crying hoarse for  almost a decade now.

The successive rail ministers' penchant for earning applause by announcing scores  of new projects every year has unfortunately resulted in spreading the available resources  thin, with not much return in sight.  As a result, progress on  these projects has been painfully slow.  

Now Rs 95,000 crore, excluding the electrical and  signalling and telecom works, and another Rs 65,000 core to optimise the output of these corridors (a grand total of Rs 1,65,000 crore) will be required to complete  them.

Basically involving doubling, gauge conversion, new lines, electrification and signalling  they are all vital for carrying increased levels of freight, the Railways’  bread winner. With the current level of budgetary support of Rs 30,000 crore a year, an additional amount of Rs. 1,50,000 crore will be needed for the next three years.

Four working groups have deliberated on    passenger and traffic services,  freight traffic services, monetisation and additional resource mobilisation, long-term finance, productivity  and efficiency — a fairly wide range of subjects to cover.

Apart from some suggestions  about monetising  the Railways’ vast land bank which has been on its  agenda for a decade now with not much headway  and  a few new gimmicks such as naming trains and stations after corporate houses to earn advertising moolah, the committee has placed its hopes on enhanced budgetary support from the central exchequer for raising long-term finances.

One of the suggestions for a new format of dynamic pricing, on the lines of air tickets, for some of the trains designated as ‘premium’ could boost earnings, while online ticketing  to be done only through the IRCTC website  should  help eliminate touts and fictitious bookings. 

The setting up of an independent committee to review the operation  of loss-making trains to assess their potential and consider options to make them viable has been suggested. Facing continuous losses, perhaps these trains may  need  to be discontinued, not a very popular decision but inescapable for regaining the Railways' financial health.

Ultimately it will be up to Suresh Prabhu  to bell the cat.

The writer is a former member of the Railway Board