Indian Railways may soon rationalize passenger fares, hints railway board chief

  • Railway board chairman Vinod Kumar Yadav said: 'We are going to rationalize the fares and freight rates'
  • Rationalization of freight rates has always been a top industry demand as higher logistics expenses add to overall costs

Shreya Nandi
Updated27 Dec 2019
Photo: Ramesh Pathania/Mint
Photo: Ramesh Pathania/Mint

Indian Railways is rationalizing passenger fares and freight rates, railway board chairman Vinod Kumar Yadav said on Thursday. “We are going to rationalize the fares and freight rates. Something is being thought about. I cannot divulge more. This is a sensitive subject. While the freight fares are already high, our target is to draw more traffic from road to railways,” Yadav told reporters.

Yadav, however, did not say if the prices will be increased.

Indian Railways runs one of the largest logistics and transportation networks in the world. The scale of operations makes it a challenge to cater to the demands of both freight and passengers, in terms of congestion in routes, leading to delays.

The railways is incurring losses in the passenger segment as the fare is subsidized, while its ends up cross-subsidizing passengers by overcharging freight. Rationalization of freight rates has always been a top industry demand as higher logistics expenses add to overall costs.

The national transporter has been trying to regain the market share it has lost to road transport. Currently, less than a third of the freight moved on land uses the railway network, compared to 60% about 15 years ago, experts said.

Revenue from freight has been sluggish amid a slowdown in the broader economy. Data showed that freight earnings grew 0.95% to 80,097 crore during April-November 2019. For the month of November alone, freight earnings were 10,207 crore, down 4.75% from the year-ago month, data available on the railway ministry website showed. Budget estimates have pegged freight earnings at 1.43 trillion for the 2019-20 financial year.

“Freight rates being brought down is one aspect, the other part is time. Any efficiency is measured through two aspects: cost and time. Cost rationalization alone won’t make the freight forwarders move from roads to railways. The time aspect also has to be optimized in parallel,” said Jagannarayan Padmanabhan, director and practice lead (transport and logistics) at Crisil Infrastructure Advisory.

Indian Railways earned a revenue of 13,398 crore from passenger fare in the first quarter of fiscal 2020, and remained nearly flat at 13,243 crore in the July-September quarter. The national transporter aims to garner revenue of 56,000 crore in the current fiscal, according to budget estimates.

Its operating ratio—the amount spent out of every rupee earned—was at its worst in 2017-18, hitting a 10-year high of 98.44%, according to the Comptroller and Auditor General of India (CAG).

Operating ratio has been high in the last few years, which indicates that the railways has not been able to generate high revenue compared to its expenses. The railways is eyeing an operating ratio of 95% in 2019-20, down from 97.3% in 2018-19, according to the Union budget.

PTI contributed to this story

With inputs from PTI

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