Getting Railways on track PDF Print E-mail
Friday, 06 March 2020 00:00
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Ishaan edit 

Given that the Railways spend around Rs 50,000 crore a year on ferrying passengers at ultra-low fares—social service obligation, in jargon—it is hardly surprising that it told the Parliamentary Standing Committee that it would not be in a position to even honour its pension liability unless the government helped fund this. Apart from the fact that the social service obligation implies a subsidy of around 50% on the total fare—and it goes up to much higher levels in certain categories like suburban transport, as in Mumbai—the pace of growth is also quite high. While social service obligations rose by over 11% per year over the past eight years—from Rs 21,383 crore in FY11 to Rs 50,689 crore in FY19—total passenger revenues increased just 9%. Ideally—in fact, as has happened in the power sector for subsidised electricity for farmers—the government should defray a large part of the subsidy.

Certainly, there is a case for raising fares, but this has to be done carefully. For one, a 50% hike cannot be made in one go, it has to be done over a few years. Also, if this is done across the board, it will drive passengers to competing modes of transport; the hike has to be different across passenger categories. A study by Debroy/Desai for FY15 had pointed out that, on an aggregate level, while buses charge Rs 1.78 per km for AC travel, trains charge a much higher fare of Rs 2.52; on the other hand, in the Delhi-Lucknow segment, second-class train fare is Rs 185 versus a staggering Rs 420 by bus. Also, while passenger fares have to be raised, it is also true that a certain kind of travel is subsidised the world over. Few metros make money anywhere in the world; to the extent the one in Delhi does, this is because of the hugely subsidised Japanese loan, and the fact that the Delhi government gave it lots of land to develop commercially, to defray the huge passenger subsidies. So, while the government needs to chip in to defray the subsidies, the Railways, too, needs to boost non-fare revenues; this could be from conventional advertising at the stations and inside the train compartments, and branding of various trains, even stations.

But, if the government is to help defray subsidies, it needs to have a genuine figure of what the subsidies really are. Right now, these are calculated on the basis of rough approximations; if the share of passenger revenue in the Railways total earnings is smaller than, say, the share of passenger operations—measured in km—to the total operations, this shows there is a subsidy. The Railways had started a pilot project for commercial accounting some years ago; the results of that need to be made public, and a schedule drawn up for extending this to the entire network.


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