The passenger needs to pay

Indian Railways is perhaps, the cheapest rail transport system in the world with an average revenue per passenger, per kilometre of Rs 1.9 for upper class, 27.47 paise for second class mail/express, 14.54 paise for ordinary second class and a mere 13.80 paise for suburban trains.

Averaging 30.78 paise per passenger, per kilometre for all classes, a train carrying 1,500 passengers would earn just over Rs 450 per km. On the other hand, revenue earned from coal — which constitutes over half of the freight carried by the railways — is Rs 1.2 per tonne km. And a train carrying 3,700 tonnes of it would earn about Rs 4,500 per km. This is 10 times the revenue earned by a passenger train.

This simple arithmetic seems to have eluded our netas, who have adorned the corner room in the Rail Bhavan for years. In the euphoria of extreme populism, they have merrily gone on announcing new passenger trains each year, adding over 2,500 new trains and taking the total to over 12,600 of which about 7,900 trains are long distance.

Sharing the same track with these passenger trains are about 7,400 freight trains that have to, understandably, give priority to Rajdhani, Shatabdi and other superfast trains, resulting in an average speed of just 25 km per hour.

This is not a very attractive option for a shipper, who would like to transport his goods at a much faster speed than that offered by the Railways. As a result, high value goods have increasingly moved over to the road sector, which in spite of serious delays and impediments at state borders has captured over 74 per cent of the freight traffic — a market share the Railways enjoyed in 1951.

In addition, the rampant populism which stalled any hike in passenger tariff, resulted in freight tariff being increased annually, often mid-year, upsetting shippers’ long-term plans.

Facing mounting criticism over the Railway’s functioning all railway ministers have formed committees with varied mandates, making Indian Railways perhaps one of the most studied transport systems in the world.

There have been no less than six committees in the last two years alone, and the one headed by D.K. Mittal submitted its 76-page report last month. Recently superannuated as revenue secretary, Mr Mittal’s quest to find ways to “improve the financial health of Indian Railways” was aided by representatives of railway PSUs like Ircon, Rites and Concor, and top management entities like Boston Consultancy Group India Ltd., McKinsey & Company, Ernst & Young and KPMG.

In three weeks it met dozens of stakeholders, including SAIL, NTPC, Ficci, CII, Assocham, the ministry of commerce, and Coal India. It also interacted with the Indian Railway Catering & Tourism Corporation, Rail Vikas Nigam Ltd, Railtel, Centre for Railway Information Services and railway managers.

Many recommendations were made by the four working groups covering passenger and traffic services, freight traffic services, monetisation and additional resource mobilisation, long-term finance, productivity and efficiency. It is now up to the Railway Board and railway minister Suresh Prabhu to take a call.

On top of the list is the completion of 24 corridors and seven feeder routes, which will require Rs 95,000 crore (excluding electrical signalling and telecom work) and another Rs 65,000 crore to optimise the output of these corridors — a whopping Rs 1,65,000 crore in total. Meant for doubling, gauge conversion, new lines, electrification and signalling etc. these projects are vital for carrying more freight which is the bread-winner of the Railways.

The report also points out that the present funding is just Rs 30,000 crore a year and an additional Rs 1,50,000 crore would be needed in the next three years. In order to correct the skewed tariff structure that has resulted in the loss-making passenger business, the report suggests the creation of an empowered committee for a regular review of tariff and to achieve recovery of the cost of operations.

Also recommended is a policy framework, whereby fares can be increased at 25 per cent of the consumer price index, announced by the RBI every quarter. In addition, a two paise per km hike has been suggested for second-class fares, including suburban and inter-city trains, till breakeven is reached. After boldly announcing a hike in passenger tariff last year, railway minister Gowda had to backtrack in the case of suburban services, as Mumbaikars were up in arms and the Shiv Sena went on the war path.

Let’s hope Mr Prabhu will not share the same fate if he decides to firmly grasp the passenger tariff nettle while presenting the rail budget on February 26.

The writer is a former member of the Railway Board