Indian railways wants to ride the gravy train. But there’s a catch

“So many unauthorized persons are travelling in my coach S3," Sultania wrote in the post. “The condition of the sleeper class is worse than the general class. It is so crowded that one can’t even walk to the toilet," he added.

In Indian railways, ‘sleeper class’ features berths for sleeping and require reservations. They can be both air conditioned (AC) or non-AC coaches. ‘General class’, seats aren’t usually reserved; they are also the cheapest.

For the last few years, Indian railways has consistently sought to push a narrative of shifting to cleaner, faster, air-conditioned and technically more advanced trains. But it’s when this official story runs into images and videos on social media of overcrowding, and of passengers from other classes squeezing into ‘higher-class’ coaches—even AC two-tier coaches—that the railways is forced to confront the reality.

There is little doubt that passenger facilities for all railway classes need an overhaul. The problem for the railways is that its social role to provide a cheap means of long-distance travel to millions of Indians is often unprofitable.

Hence, this shift to more ‘value-added’ services is provided at a price. And often, this is a price that a substantial slice of train travellers may be unable to pay.

For years, the railways struggled to make ends meet. After slipping deep into the red due to the standstill enforced by the covid-19 pandemic, the railways did recover, but only just. In 2023-24, its operating expenses fell marginally short of its earnings from moving passengers and goods.

While the problem of crowding in Indian trains has always been there, especially during the festive season when millions make their way home to celebrate, it’s likely this problem will worsen in the years ahead. That’s because the railways’ own projections show a stronger growth of AC passengers in the years ahead, and a slower growth in the pace of non-AC passengers.

While this is quite likely, this is where the numbers become important. At what pace will AC travel grow relative to second-class travel? And what will be the growth in ticket prices between the two categories of travel? If the railways over-estimates growth in AC travel, and increases the share of AC coaches accordingly, the slower growth in non-AC coaches relative to non-AC passenger growth could increase overcrowding.

Finally, the affordability of AC travel, which is what the railways wants everyone to shift to in future, is dependent on broader income growth in the economy for the vast mass of people. If those incomes don’t keep pace with ticket prices, travellers will be forced to travel in cheaper coaches. If there are not enough cheap coaches to accommodate them, it will result in overcrowding across the rail network.

Two Indias

The railways faces a classic problem that many consumer businesses face, which is that a relatively small slice of passengers contribute a large chunk of its revenue. In 2023-24, AC-class passengers (chair car, AC 2-tier and 3-tier, and AC first class) accounted for around 11% of all passengers, but well over 50% of revenue. In contrast, second-class passengers accounted for three-quarters of passengers, but less than a quarter of revenue. And interestingly, non-AC sleeper class passengers (on non-suburban routes), accounted for 13% of passengers, but about 22% in revenue.

Seen another way, in 2016-17, the railways earned ₹1.56 to move one passenger in a two-tier AC berth for 1 km. This is about 7.5 times what it earned from moving a second-class passenger in a non-mail/express train over the same distance. By 2023-24, because of progressive hikes in prices in the upper tiers, that disparity had widened to 13 times (see chart).

But it’s not as if prices have not been hiked for cheaper coaches during this period. Even for non-AC sleeper coaches (mail/express or ordinary), revenue earned by railways for each passenger-kilometre has seen an increase of 24-70% from 2016-17 (on non-suburban routes).

The vast bulk of passengers (over 90%) travel in non-AC sleeper class or second class. For economic as well as political reasons, raising ticket prices in this segment beyond a point is not possible. This leaves the railways with the pricier coaches. But even here, the railways hardly has unlimited freedom to raise prices. Beyond a point, and on some routes, air travel begins to become a serious alternative for passengers who would otherwise take AC coaches.

Capacity Constraints

At this point, another problem arises for the railways—that of the availability of coaches to carry different classes of passengers. The Hindu reported, based on data sourced using the Right to Information (RTI) Act, that 52.6 million tickets that were waitlisted in 2023 were cancelled, earning the railways ₹505 crore in cancellation charges.

While a shortage of berths relative to demand is a problem across classes of passengers, it’s likely that this is particularly acute for second-class and sleeper-class passengers who form the bulk of ticket buyers. According to annual railway data, between 2016 and 2022, the share of berths available to second-or sleeper-class passengers (excluding suburban passengers), fell from 88% to 82%. By 2019 itself, the share had fallen to 82%. But covid-19 caused the railways to run more second-class coaches, causing the share to rise to 85% in 2020. By 2022, however, the share had returned to its 2019 level.

Thus, the disparity between this share of seats for second-class passengers, and the share of actual passengers travelling in these classes (around 89% in 2023-24), has widened in recent years. In other words, the railways has sought to address its pricing dilemma by both increasing the price and the availability of upper-class berths.

Non-AC to AC Shift

The older policy on mail or express trains was to provide for 12 general and sleeper non-AC coaches, and eight AC coaches in a train of 22 coaches. This was changed in June 2022, when the Railway Board issued a circular (CC-70/2022) increasing the composition of such trains from eight-nine AC coaches to 15, and reducing the number of non-AC passenger coaches from 11-12 to just five (with the remaining coaches being pantry cars or generator vans). Thus, even in these so-called ‘long distance, non-premium’ type trains, a bulk of passenger coaches are now for AC-class travel only. Remember, AC passengers are charged higher fares.

While the availability of second-class berths has increased in absolute terms between 2016 and 2022, due to more trains being added, that increase conceals wide disparities across different regions (see chart).

The railways are divided into 16 regional zones. Just three of these account for about a third of second-class berths: southern zone (covering Tamil Nadu and Kerala), western zone (covering Gujarat and parts of northern Maharashtra, Rajasthan and Madhya Pradesh), and the northern zone (covering North India).

Four zones actually saw a decline in the number of second-class seats and berths between 2016 and 2022: central zone (covering a large part of Maharashtra), the north east frontier zone (covering north east India), and the east central and south east central zones (together covering east Madhya Pradesh, parts of Jharkhand and Bihar). Second-class passengers in the north east were particularly hard hit, with second-class berths available to them declining at a rate of over 6% per annum between the two years. At the other extreme, the western zone, covering the entire state of Gujarat, saw a huge bump in the availability of second-class berths, growing at almost 8% per annum.

Future Plans

In 2022, Indian railways issued its National Rail Plan (NRP) for India-2030, in an attempt to “create a future ready railway system by 2030". The aim was to forecast both goods and passenger growth and demand, and hence aim to build out rail infrastructure—both lines and rolling stock—to meet that new demand in the decades to come.

To do this, the NRP split passengers into two broad categories: long distance AC (LDAC) and long-distance non-AC passengers (LDNA), with the latter including second-class passengers. The NRP then computed average annual passenger growth rates in these two categories between 2008 and 2018. Between 2008 and 2018, the LDAC category of passengers grew at 9.1% per annum, while the LDNA category grew at a rate of just 1.4% per annum.

It then computed the ratio between each of these growth rates, and the overall population growth rate (at 1.1%). Assuming these ratios would hold in the future, it then applied the ratios to projected population growth rates in future years (up to 2041-51) and computed the increase in passengers in these two categories for each future year. Based on these passenger demand forecasts, the estimates for the future need for rolling stock was prepared.

While it’s quite likely that AC class passengers will likely grow at a faster rate than non-AC passengers, for no other reason than the low base, it’s unclear why the railways chose to use its existing passenger statistics for forecasting future demand.

By doing this, the railways effectively determines the outcome it is trying to estimate, since actual passenger numbers don’t take into account unmet demand, which often exceeds the actual supply of coaches, as indicated by the huge number of passengers who get on to a waitlist only to be disappointed.

Put another way, if the railways chose to make available second-class coaches at a much slower rate than AC coaches, it would show up in the final statistics as a slow growth in the number of second-class passengers, relative to that of AC passengers.

It was precisely this disparity in growth rates that was built into the passenger forecast model used by the NRP. The NRP’s authors themselves acknowledge this, saying: “Reason for stagnation in the growth of the unreserved/non-AC category may be due to stagnation in supply. Since the seats in the unreserved category are limited, a meagre growth witnessed in this category."

In 2020, the Railway Board chairperson had told press persons that in the longer term, as part of its policy to increase the speed of trains, the railways was looking to phase out non-AC sleeper class altogether on trains running at higher speeds (130 kmph and above). This along with the introduction of newer classes of trains (like Vande Bharat), and the ‘premiumization’ of even ‘non-premium’ trains by increasing the share of AC coaches (thus implying higher revenue per train), are all aimed at a fixing the contradiction that the railways have faced for years, of resolving its social service obligations, with the need to be profitable. It remains to be seen whether these changes will resolve this contradiction, or only make it worse.

howindialives.com is a search engine for public data