Railways may cut fares to fight inflation

Railways may cut fares to fight inflation
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First Published: Sun, Feb 25 2007. 01 47 PM IST
Updated: Sun, Feb 25 2007. 01 47 PM IST
Reuters
NEW DELHI: Indian Railway Minister Lalu Prasad Yadav could reduce some passenger and freight fares when he unveils his business plans for one of the world’s largest rail networks on 26 February, analysts said.
Indian Railways runs more than 14,000 passenger and freight trains and carries 15 million people daily,which is more than the population of Sweden and Norway combined.
Last year passenger and freight rates were left broadly unchanged, but analysts said a cut in freight charges in the fiscal year starting in April could help the government in its battle against inflation.
“Reducing some freight rates could be a possibility if they are adding to food inflation,” said DK Joshi, principal economist at domestic credit rating agency Crisil.
Wholesale price inflation stood at an annual 6.63% in early February after touching 6.73% at the start of the month, its highest in more than two years.
Analysts say the network has a cash surplus of nearly $2.5 billion (Rs 11,05,820 crore), having turned itself round over the past year.
“The minister can afford to be a little liberal as the surplus is there and he could reduce some passenger and freight fares,” said DH Pai Panandikar, president of private economic think tank RPG Foundation.
For years, the state-run rail network has been synonymous with delays, losses and red tape, losing freight traffic to trucks and passengers to a fleet of new, cut-price air carriers.
Since last year it has pulled out all the stops to turn a profit, from competitive bidding for catering to leasing out advertising space on railway buildings, stations and some trains.
The ministry is trying to increase rail’s share of freight by cutting costs and turnaround times, appealing to businesses frustrated by the slow movement of goods. Roads carry 85% of India’s passenger traffic and 75% of freight.
“The minister will continue with his efforts to make the railways competitive and efficient,” said TK Bhaumik, chief economist with industrial conglomerate Reliance Industries Ltd.
“Modernisation will be a thrust area and fare restructuring and innovation could be a possibility to meet intense competition from airlines and road transport,” he added.
The government is desperate to keep prices under control as it approaches key state elections. It cut petrol and diesel prices this month and has also cut import duties on cement, capital goods, steel, aluminium, copper and other industrial raw materials, as well as on palm and sunflower oil.
The central bank has also tightened policy to contain prices.
The railway budget is separate from the federal budget, due on 28 February, in keeping with a practice set under British colonial rule and retained due to the sheer volume of freight and passenger receipts.
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First Published: Sun, Feb 25 2007. 01 47 PM IST