Railways hikes passenger fares, freight tariffs
While fares of AC and sleeper classes are increased by about 2%, freight rates are raised by 1.7%
New Delhi: On a day the Election Commission announced dates for assembly elections in five states, the Congress-led United Progressive Alliance (UPA) government did not flinch from raising railway fares—a move seen as unpopular in an election year.
The railways increased passenger fares by up to 2% across classes, except for the unreserved section, and freight rates by 1.7% across commodities.
The increase comes with the revision of the fuel adjustment component (FAC), a component that links rail tariffs with the price of fuel.
FAC was introduced in the 2013-14 railway budget as a reform measure to improve the finances of the railways and was proposed to be revised twice a year.
Fuel costs have gone up for electric trains by 15.5% and diesel trains by over 7% between February and July, said a release issued by the railways late on Friday.
The increase in passenger fares will be effective from the midnight of 6 October, while that in freight tariffs will be effective from the midnight of 9 October.
Railways last raised freight rates on 1 April by 4-8 paise per kg across commodities including coal, cement and iron ore.
Passenger fares were raised in January by 2-10 paise per km.
Fuel costs constitute 15-20% of railways’ total expenditure.
The railways now expects incremental earnings of ₹ 1,150 crore in the balance six months of this fiscal.
The increase in freight will lead to an increase in the prices of commodities such as coal, iron ore and steel, cement, petroleum products and foodgrain.
The move may be inflationary if companies pass on the increase in prices to consumers.
The railways recently imposed a 15% busy-season surcharge, effective 1 October, on freight rates, higher than the 10-12% rate levied last year.
The busy-season surcharge will be applicable till 30 June.
“For the national economy to do well, it is important that Indian railways remains financially healthy. It is a good decision by the railways to stay clear of populism and increase the rates in line with the increase in input costs. The raise is modest and should not be a problem for customers to absorb. It’s important to keep the railways solvent and vibrant, “said Abhaya Agarwal, a partner at EY Llp, who oversees the infrastructure practice at the consulting firm in India.
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