Railways may decide on passenger fare hike in October

A decision on a possible hike in passenger fares will be taken by the Railways in October, when it will review the fuel adjustment component (FAC) in the wake of rising fuel and energy costs.

While the freight rate will go up by about 5.7 per cent from April 1 due to the linking of the FAC to the freight tariff, the Railways will examine its applicability in its passenger services in October this year.

“There is a policy now and the FAC is linked with energy and fuel prices and calculated accordingly,” Railway Board chairman Vinay Mittal said at a conference.

Passenger fares could go up by 2 to 3 per cent if the FAC is linked to the basic fare in passenger services in October.

“The FAC will be reviewed after six months for both freight and passenger fares. Whether the FAC will be reduced or increased, it will be examined in October and a decision will be taken only then,” he said, adding, “by that time, the Rail Tariff Authority is also expected to be constituted.”

The Rail Tariff Authority, the first of its kind for the Railways, will suggest the level of tariffs for both freight and passenger services from time to time, taking into account input costs and market conditions.

Mr Mittal said currently the RTA is in the inter-ministerial consultation stage and a Cabinet note will be prepared for it shortly.

“The FAC for passenger and freight are calculated separately. While we decided to link the FAC with freight tariff from April 1, we absorbed the increased fuel cost of Rs. 800 crore and did not hike passenger fares,” he said.

“Since we raised the passenger fare in January we did not consider it again, and the FAC was implemented for freight only,” he said.

Asked repeatedly whether or not the FAC will be imposed in October, Mr Mittal, however, said “I am not in a position to say that now because it will be reviewed and then a decision will be

The FAC, which takes into account both electricity and diesel costs, is about 16 to 17 per cent of the total expenditure. There is a 39 per cent hike in fuel cost and an 8 per cent energy hike till January 2013 from April 2012.

Mr Mittal also said that the Railways is focusing on fiscal discipline by curbing expenditure.

Referring to passenger amenities, he said measures are being taken to bring down the accident rate and improving passenger amenities at rail premises.


Highlights of the Railway Budget 2013-2014

First time in the UPA regime a Congress Minister presented the Railway Budget, which was politically correct. While a direct hike of an average 5-6 per cent on frieght rates was announced, Pawan Kumar Bansal touched passenger fares indirectly by effecting marginal increases in charges like — superfast trains, reservation fee, clerkage charge, cancellation charge and tatkal.

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The Minister, while preparing the ground for passing on any fuel price increase to the users, said that subsequent increase in rates of diesel in January has added Rs 3,300 crore to the fuel bill of railways, taking a substantial portion of the additional resources targeted.

Besides, electricity tariffs are also revised periodically, he said.

Rail freight hike on diesel may lead to rise in retail prices

“The increase in fuel bill during 2013-14 on account of these revisions in 2012-13 alone would be more than Rs 5,100 crore. In the light of deregulation of diesel, Railways finances need to be rationally insulated and to this end a mechanism to neutralise the impact of fuel prices on operating expenses is required to be put in place,” the Minister said.

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Freight tariff

In Budget 2012-13, it was propsoed to segregate fuel component in tariffs as fuel adjustment component (FAC). “I propose that his component be dynamic in nature and change in either direction with the change in fuel cost, say, twice a year,” the Minister said.

Bansal has proposed to implement the fuel ajustment component-linked revision in only freight tariff from April 1, 2013, “As regards passenger fares, since these were revised only in January this year, I do not intend to pass on the additional burden now and the railways will absorb the impact of Rs 850 crore on this account,” he said.

Besides, talking about Railway finances, he also spoke about green initiatives, job opportunities by creating rail-based industries, ppp projects, catering, rail tourism.

Highlights of the Railway Budget 2013-2014

67 new express trains to be introduced; 27 passenger trains and 5 EMUs.

An independent Rail Tariff Authority has been formalised.

Railway revenues to show a balance of Rs 12,506 crore in 2013-14.

Planned investment of Rs 63,363 crore for 2013-14, including Rs 600 crore from PPP route.

Explanatory Memorandum of Railway Budget 2013-14

Plans for 22 new lines.

Electrification of 1,200 km of tracks this year.

Estimate for 2012-13: Freight target at 1,047 mt, which is 40 mt more than current year. Revenue target set at Rs 93,554 crore for frieght.

5.2 per cent growth in passengers targeted; earning target at Rs 42,010 crore.

Rs 3,000 crore loan from Finance Ministry repaid with interest by Railways this financial year.

IRFC to borrow Rs 15,103 crore next year

Speech of Pawan Kumar Bansal introducing the Railway Budget, 2013-14

Passenger revenue revised estimates at Rs 32,400 crore, lower by Rs 3,573 crore from Budget estimate. Operating ratio expected to improve to 87.8 per cent in 2013-14 from 88.8 per cent in the current fiscal.

Strict financial discipline measures: 347 projects have been identified as priority projects and to complete them in timebound manner; Judicious mix of funding is required.

Proposed to set up debt service fund for servicing of JICA and World Bank loans for dedicated frieght corridor.

Mountain rails in India will be revamped on the lines of what has been done in Austria and the Swiss Alps. No specific deadlines, though.

Freedom fighters’ passes renewal only after 3 years against every year now.

Arunachal Pradesh will also be brought into the rail network for the first time.

New coach manufacturing and maintenance facilities to be set up in various places including Rae Bareli, Bhilwara, Sonepat, Kalahandi, Kolar, Palakkad and Pratapgarh

Financing: Setting up of Indian Railway Institute of Financial Management at Secunderabad.

Set up a Chair at TERI for railway related research.

Multi disciplinary training institute at Nagpur.

Staff requirement: To fill up 1.5 lakh vacancies. Construction of staff quarters in PPP mode. Provision of quarters for single women.

Railway production units: Special drive for scrap disposal. Rs 4,500-cr target for 2013-14.

Railways set to enter 1 billion tonne freight club of China, Russia and US.

Green energy initiatives: Setting up of Railway energy management company. 75 MW windmill plants. Ban use of plastics in catering. 1,100 level crossing to be powered by solar/wind energy.

Set to attract Rs 1 lakh crore investment through Public Private Partnerhsip route in 12th Plan.

Rs 1 lakh crore each for Railway Land Development Authority and Indian Railway Station Development Corporation.

Revamped policy partnership with ports, mines etc. A model that will be a win-win for both.

Common rail-bus ticket to be introduced for Katra-Vaishnodevi pilgrims

60 more ‘adarsh’ stations will be rolled out.

Need-based rail connectivity to East

Freight loading to be 38 million tonne more than 2011-12 at 1,007 million tonne.

Azadi Express connecting places associated with freedom movement.

Executive lounges in four more stations including Patna, Nagpur, Jaipur, Visakhapatnam.

IRCTC Web site: Internet booking to be strengthened with next-gen e-ticketing system to eliminate delays.

Identification of 104 stations for upgradation in places with more than one million population and of religious significance.

Real time information will facilitate: 7,200 tickets per minute as opposed to 2,000 this system will facilitate and will support 1 lakh 20,000 users as opposed to 20,000 users today. Internet booking hours will be increased from 12.30 a.m. to 11.30 p.m. E-Booking will also be expanded to allow bookings through mobile phones.

Use of Aadhaar by Railways: Real time information to passengers: Internet booking and e-ticketing. SMS alerts to passengers. Railways will use Aadhaar database for bookings and validation of passengers.

Special A/C coaches Anubhuti with latest modern services to be introduced in select Shatabdi and Rajdhani trains with commensurate fare.

Mechanised laundry and electronic display on board on trains.

Putting up of six additional Rail Neer bottling plants, including at Vijayawada, Nagpur.

Extensions of bio-toilets on train.

Spells out safety measures to avoid accidents at level crossing. To prepare corporate safety plan for 10 year period. Elimination of 10,700 unmanned level crossings targeted during the Plan; no more new such crossings to be created.

Resource constraint cannot be an excuse for sub-standard services.

Losses to Railways on account of passenger traffic likely to mount to Rs 24,600 crore in 2012-13 from Rs 22,500 crore in 2011-12.

Rs 1 lakh crore will be raised from public-private partnership, Rs 1.05 lakh crore through internal resources in the 12th Plan.

12th Plan railway size will be Rs 5.19 lakh crore, with gross budgetary support of Rs 1.94 lakh crore. Internal resources target for the 12th Plan seems to be a tall order. Raising Rs 95,000 crore in the next four years requires a paradigm shift in revenue generation.

In the 11th Plan, Railways fell short of target for doubling and gauge conversion. But met target for new lines and electricfication.


Saving the Railways, for the aam aadmi

The government must stop tinkering with this public service provider in the name of coalition dharma. There should be a freeze on adding passenger trains and the focus must shift to improving existing services.

A Railway Minister is sacked midway through the budget session of Parliament, a rather bizarre first even for the 160-year-old rail network. An information website, http://railradar.trainenquiry.com shows that at any given moment, not more than 60 per cent of the trains are running on time. These two seemingly related, yet unconnected, scenarios have one common factor: the aam aadmi. In the first case, the Minister’s well intentioned move to raise lower class passenger fares was seen by the powers that be as blatantly anti-aam aadmi. The second is the ultimate manifestation of a policy of relentless proliferation of train services each year in the name of helping the aam aadmi, without adequate line and terminal capacity and supporting infrastructure, leading to an overstrained system. During the last decade, the number of new train services announced during each budget varied from 46 to 105 under four different Railway Ministers. This excludes frequencies of trains which were increased, and extensions of existing services.

Calculating punctuality

More than most other sectors, many initiatives and decisions taken (or not taken) by the Railways are supposedly for the benefit of the aam aadmi, the proverbial common man. This focus is unavoidable as the Railways remain the cheapest, yet fastest, mode of travel for the country’s millions. However some of these measures have exactly the opposite effect in the long run. In the case of the burgeoning additional train services, even a minor incident has a cascading effect on the punctuality of a large number of trains, inconveniencing tens of thousands of passengers. Punctuality at intermediate stations is almost non-existent. The Railways’ own statistics of punctuality put the figure usually above 90 per cent. This is because the Railways reckon punctuality based on the right time of arrival at the destination, irrespective of how late a train is in between, whereas the website shows the actual “instantaneous” position. To achieve destination punctuality, the running schedule is often padded up with extra time towards the end of the journey. This in effect eats into line capacity.

Railways in general and Indian Railways (IR) in particular, because of its large public service footprint and load of unremunerative projects, are inherently “unbalanced” financially. Long gestation periods of projects, their capital intensive nature and time lag between investment and generation of revenue make substantial budgetary support from the government unavoidable. The usual advice to IR to generate revenues by monetising “surplus” land or selling off scrap is that much pie in the sky — the revenue inflow from such sources is at best sporadic, unpredictable, process-ridden, and, ultimately, self-limiting. Whereas the main items of expenditure — staff and fuel/energy costs — often vary almost instantaneously, the only immediate means available to even partially offset them is an increase in fares or freight tariff.

Behind ‘no fare increase’

No one asks a fruit seller whether an apple that cost only Rs.20 till yesterday and now being sold at Rs.30 will taste sweeter. No one expects the duration of power cuts to reduce even if the power tariff is doubled overnight. Such increases are taken in their stride as the natural consequence of inflation, rise in input costs or market forces. But the moment the Railways increase the fares even nominally, the demand or expectation is for “additional facilities.” The Railways themselves are to blame to a large extent for nurturing such unreasonable expectations, keeping fares unchanged over long periods, ostensibly in the interest of the aam aadmi. Instead, freight tariffs are increased, either directly or by indirect levies, to compensate the loss on the passenger front. This increases transportation costs of essential commodities, pushing up prices affecting the aam aadmi over a wider population. It is this shifting of the burden from the actual rail users to the society at large that is applauded in Parliament with loud thumping of desks whenever a Railway Minister heroically announces “no fare increase.” While some cross-subsidisation is unavoidable in the Indian context, prolonged suppression of passenger fares also imposes costs on the society. The setting up of an independent Railway Tariff Regulatory Authority, hinted at in the last budget, should hopefully free the Railways from the politics of fare and freight tariff fixing, pun unintended.

Administrative costs

The “unbalance” is also systemic. IR is perhaps the only railway system in the world that still has its own full-fledged medical, security and manufacturing establishments. Consequently, it carries a disproportionately heavy burden of administrative costs. There are more security personnel (60,000) and medical staff (57,000) than train drivers (36,000) apart from 44,000 in the Railways’ functioning production units. This is not to belittle the contributions of these sectors but to stress that with its present organisational structure, the staff costs are disproportionately high. Added to this is the decadal onslaught of the Pay Commission that delivers a virtual body blow to Railway finances. The last (Sixth) Pay Commission added about Rs.13,000 crore to the annual wage bill, representing a 50 per cent hike during 2008-09.

Fine. So, why don’t the Railways shed the off-line activities and get out of the ambit of the Pay Commission by appropriate restructuring? More easily said than done. At least four Expert Committees in the last two decades have recommended some form of reorganisation, away from the monolithic bureaucracy of today. But to expect the Railways themselves to initiate any basic structural change is like asking a man to voluntarily jump off a cliff. The initiative or push for such change has to come from outside. And any such change is bound to be painful and even disruptive for a period, and a major political gamble. But given the realities of coalition politics of the day, it is highly unlikely that any government at the centre in the foreseeable future will have the stomach to even attempt such a major initiative.

What are the implications of the status quo to the aam aadmi? First, there is only so much that one can expect, in terms of quality of service, from a monolithic bureaucratically structured entity operating as a virtual monopoly in the railway sector. This is not a reflection on the quality or commitment of a majority of railway personnel but has a lot to do with the incentives driving a form of organisation that is designed for stability, is precedent-driven, risk-averse and focused on vertical, functional silos.

Freight corridor opportunity

Second, as structured at present, heavy staff costs buck the generation of internal resources. The Railway Budget 2012-13 proposed an outlay of Rs.7.35 lakh crore during the 12th Five Year Plan (2012-2017) of which the major share of funding of Rs.2.5 lakh crore (34 per cent) is through gross budgetary support (GBS), followed by Rs.2.18 lakh crore through Extra Budgetary Resources (mainly commercial borrowings), Rs.1.99 lakh crore through internal resource generation (IRG) and the balance from other sources. The Plan is thus heavily dependent on GBS and costly commercial borrowings. Under the circumstances, adequate and consistent budgetary support becomes a necessity, not an option. It however needs to be remembered that this funding source (GBS) has myriad alternative uses in other crucial sectors affecting the aam aadmi, such as health and education.

What are the immediate prospects? There is a window of opportunity presented by the two Dedicated Freight Corridor (DFC) projects which are already in progress, that can boost the freight earnings substantially and release capacity in the existing trunk routes. It is of utmost importance to complete these projects and make them operational before the effects of the next Pay Commission deal a near-fatal blow to the Railways’ finances around 2017-18. In the interim, no additional passenger train services should be introduced.

For the Railways it is back to basics. While it is necessary to dream about and plan for bullet trains whizzing past at over 300 km/hour, it is useful to remember the lament of an “aam aadmi” almost a century ago:

“During the whole journey, not once was the compartment swept or cleaned. The closet was also not cleaned during the journey. No water in tank. The return journey was no better. The compartment itself was evil looking…..It was pestilentially dirty” — Mohandas Karamchand Gandhi, describing a train journey in September 1917.

The daily concerns of today’s aam aadmi remain unchanged. The period of moratorium on additional passenger train services should be utilised to pull up the quality of basic services offered to the aam aadmi in terms of safety, punctuality, cleanliness and courtesy.

As for the political establishment in general and the highest levels of the government in particular, here are a few suggestions: Stop tinkering with the Railways in the name of “coalition dharma”; treat it on a par with the “Big Four” — Home, Finance, Defence and External Affairs; evolve a National Railway Policy with consensus across the political spectrum and a long-term common minimum growth plan spanning at least 10 to 15 years, that will be binding irrespective of who or which party or combination is in power.

A climate of drift, sudden policy switches and adhocism only serve to keep a great institution far below its true potential. And that perhaps is the biggest disservice that can be meted out to the nation’s aam aadmi.

(K. Balakesari is Former Member Staff/Railway Board. Email: balakesari_k@hotmail.com)


Diesel price hike will cost railways extra 1,200 crore per year

The diesel price hike has come as a shocker for railways which is reeling under a financial crunch but there is no immediate plan to increase freight tariff. The Rs 5 hike in price of diesel is expected to put an additional burden of around Rs 1,200 crore every year on the cash-strapped transporter, headed by Trinamool Congress nominee Mukul Roy.

“There is no move as yet to increase freight charges though the increase in diesel price will hit us badly. As of now, we have no plan to shift the burden on freight operators,” a senior railway official said.

The railways had effected a 20-25% hike in freight rates before the rail budget this year.

The transporter consumes about 280 crore litres of diesel every year to run its fleet of around 4,500 diesel locomotives, hauling both freight and passenger trains. Railways paid about Rs 13,209 crore in the current fiscal and Rs 11,741 crore during the last fiscal towards its fuel bill. The increase in fuel consumption every year is due to addition of new services and more freight haulage. “Since nearly six months have already passed in 2012-13, the additional cost of the fuel bill will be around Rs 100 crore per month this fiscal,” an official said.


Published in: on September 22, 2012 at 1:47 pm  Leave a Comment