Indian Railways fares less than those in Pakistan, Sri Lanka and Bangladesh! Why it’s time for a fare hike

By Sunil Kumar

Indian Railways has literally travelled a long distance since its inception in the year 1853. It is the lifeline of the country and among the world’s largest railway networks. Today, Indian Railways transports 23 million people across different parts of the country on a daily basis. This is no mean feat since this figure roughly corresponds to the population of Australia.

However, today the Indian Railways stands at crossroads. In the passenger segment, there is a paradoxical situation. On one hand, there has been a steep increase in terms of input costs, particularly the fuel cost, on the other hand, the cumulative impact of concessional fare and social service obligations has produced a double whammy. However, successive governments either chose to ignore it or cross-subsidise it. Even the much-touted ‘turnaround’ during the earlier regimes, as a post-facto analysis indicates more of window dressing and creative accounting rather than anything substantial.

In the recent past, some efforts have been made to shed populism and focus on performance. The merger of the Railway Budget with the Union Budget has given Indian Railways, the much-needed momentum required for effecting a massive transformation. Some changes are definitely evident at the front-end – the stations are much cleaner, the safety record is much better and the trains are faster. Even in terms of technology adoption and digitization, Indian Railways has a pretty decent record and more than 70% of reserved ticketing is now being done online. But in the era of demanding clientele, there is a greater pressure on Indian Railways to provide a seamless travel experience from alighting to disembarking. This means more passenger amenities and greater investments. But the million-dollar conundrum is how do you fund it?

Let’s for a moment pause and consider the passenger fare structure. For long, the fare structure has been lop-sided and passengers have been shielded from paying the actual cost. In its own admission, Indian Railways recovers only 57% of the total cost in the passenger segment. So who foots the rest of the bill? Answer: It is partly absorbed and partly cross-subsidized from freight. But this historic strategy has already started yielding diminishing marginal returns and the parcel traffic is shifting towards the road-route. This is not only an economic loss but an ecological loss since transport through Indian Railways is cleaner and greener. To compound it, low-cost airlines with aggressive pricing are knocking off the premium paying segment in the long-distance segment.

Indian Railways has tried to pace up to this competition by introducing a plethora of new trains like Vande Bharat, Humsafar trains, Gatimaan trains which are much better than predecessors in terms of speed, comfort and service quality. However, to address capacity constraints and meet heightened civic aspirations there is a need to initiate bold reforms and ‘Bite the Bullet’ to get its passenger fare structure right.

The recent fare hike, though marginal and modest, was a much-needed intervention. This is probably the lowest fare increase in the recent past that too after a gap of almost 6 years. Indian Railways had to walk a tight rope and balance the affordability and accessibility concerns. Despite this, 66% of the passenger segment has been kept out of the recent fare increase. In fact, if one wants to compare Indian Railways with networks in adjoining countries, the average fare difference across different classes is striking! Passenger fare across Indian Railways is the least among the adjoining countries like Pakistan, Bangladesh and Sri Lanka. Although Indian Railways is not comparable with others given the diversity of its stakeholders and plurality of travel options, the illustration below offers some insight to our low-cost fares.

Graph

Comparing the average estimated passenger fares of railways of these countries across different classes, it has been found that our immediate neighbours viz. Pakistan, Bangladesh and Sri Lanka have significantly higher fares as compared to India. In commuter class, the average passenger fare in India is around 22.8 paisa/km, while in Pakistan the same is around 48 paisa/km (110% more), in Sri Lanka the same is around 48.1 paisa/km (111% more) and in Bangladesh the same is around 33 paisa/km (45% more). Similarly, in Non-AC reserved class, the average passenger fare in India is around 39.5 paisa/km, while in Pakistan the same is around 48 paisa/km (22% more), in Sri Lanka the same is around 67.9 paisa/km (72% more) and in Bangladesh the same is around 147 paisa/km (272% more). Also, in AC reserved class, the average passenger fare in India is around 175 paisa/km, while in Pakistan the same is around 176.5 paisa/km (1% more) and Bangladesh the same is around 227 paisa/km (33% more). Sri Lankan Railways have very few AC trains running on specific routes.

There is no disputing the fact that Indian Railways has seen a slew of reforms in the recent past and a sense of urgency in the air when it comes to implementing them. Further, for the economy to reach the $5 trillion mark, Indian Railways will have to play a crucial role and unlock its full potential. It needs to generate more resources internally rather than seek financial support from the government. Non-Fare mobilisation and voluntary Schemes like ‘Give up’ can supplement but cannot by itself fuel the ambitious expansion drive launched by Indian Railways. Railways not only needs ‘In-dhan’ but also ‘Jan-Dhan’ to become reliant and robust. It needs all hands on deck to work.

The data in the fare chart indicates that there are enough elasticity and room for ‘rationalisation’ of passenger fares. It is time that we put our full capacity to use. It is said that a politician thinks of the next election, while the visionary thinks of the next generation. In line with the current government’s philosophy of economic pragmatism rather than unbridled populism, it is time for Indian Railways to discover its full potential and take the leap. Citizens too are mature enough to support and afford the fare rationalisation. Only then we can break the vicious cycle of low-fare-low investment and initiate a virtuous cycle of rationalised-fare-fuelled investment cycle.

Let’s not ‘Give Up’ this dream and instead lets ‘Give to’ Railways to put ‘Great’ back into Indian Railways. On the impending momentous occasion of 75 years of Independence and 150 years of Mahatma, let’s make a reliant and robust Indian Railways, a legacy for the future not a relic of the past. The subsidy is given on the passenger fare side needs to be gradually brought down to a reasonable and competitive level which the public should be able to bear and which also gives better fund availability to the Railway administration.

(The author is Former Additional Member, Railway Board. Views are personal)

Source: Financial Express