Railways gets green signal for ‘creeping’ rail fare hike

Currently, IR recovers only 57% of the cost in passenger services and around 37% in suburban services. Class-wise, only the AC III tier fetches it a profit, but that is neutralised by the losses from other classes.

NEW DELHI: The Prime Minister’s office has given its sanction for a hike in Railway fares, which have remained suppressed for years. The increase in passenger fares may be implemented sometime later this year. The signal to work on the move followed a meeting of the infrastructure ministries in late April, chaired by Prime Minister Narendra Modi, in which the state of the Railways was reviewed.

“Implement creeping increase in passenger fares” was one of the actionable points for the transporter issued by the PMOThe timeline frozen for the move, and agreed to by the Railways, is September 2017.

Railway fare hike is feared to have a political backlash, and getting a green signal on this from the political masters has always been a challenge for the ministry officials, especially during the UPA dispensation, even as the transporter’s coffers continued to bleed. As a result, the Railways maintains silence on the move, and officially denies that a hike is in the works till the move is actually announced.

Documents from the April review meeting show that this time, there is agreement on the necessity for a “creeping increase” in fares from time to time, with a definite milestone being set for the move.

The meeting also mandated the Railways to work as “a commercial enterprise with focus on core operations to provide efficient and safe travel while enhancing customer experience”.

A top Railway Board functionary accepted that the mandate from the PMO after the April 25 meeting was clear but maintained that the modalities had not been worked out yet. “It is clear what ‘creeping increase’ means. Now we have to take a call on it. Nothing has been finalised yet,” said the officer.

He explained that from the point of view of commercial viability, the need of the hour is to increase the fares of non-AC classes as they have remained unchanged for ages. But that is easier said than done. In their time as railway minister, both Lalu Prasad and successor Mamata Banerjee never hiked fares. Lalu in fact reduced fares in his last Rail Budget by 2-7 per cent across classes.

Later, Dinesh Trivedi as railway minister had earned party supremo Mamata’s wrath and eventually lost his job after introducing a hike in passenger fares in his Rail Budget of 2012-13. The hike, proposed in the novel form of paise per kilometre travelled — for example, 5 paise per km for Sleeper Class — was rolled back for all classes, except AC First Class, Executive Class, AC-II tier, and First Class, by his successor and Mamata’s then deputy, Mukul Roy.

It was finally Railway Minister Pawan Bansal who hiked fares across classes in 2013, around a decade after the last proper hike. The hike was between 2 and 10 paise per kilometre depending on the class, including the General and Sleeper Classes. The hike came less than four months after the Trinamool Congress walked out of the UPA coalition.

Even the NDA government under Modi has had its share of troubles with fare hike. On June 25, 2014, pressure from ally Shiv Sena had forced then railway minister Sadananda Gowda to roll back hikes in the suburban train services, which had, in fact, been decided by the outgoing UPA government.

Current Railway Minister Suresh Prabhu has warded off proposals from the bureaucracy for a direct hike in the past two years. Instead, last year saw the rollout of the dynamic fare model, which increased fares of premium trains and AC classes by up to 50 per cent. But that exercise had mostly spared non-AC, General Classes.

Officials said in what shape and form the new fare hike will come this year is yet unknown. One section of officials said the government was aiming at a “smart play” which involves progressive incremental revision that does not hurt the pockets of the passengers in one go, and does not at once give the impression that a steep hike has taken place — hence the phrase “creeping increase”.

Another set of officers said the Rail Development Authority (RDA), the proposed regulatory body that would be in place by the end of this year, might take up the exercise. Even though the RDA does not have the powers to compel the Railways to hike fares, officials said an “advisory” from the regulator will strengthen the case for the hike and may somewhat cushion a backlash.

Currently, the Railways recovers only 57 per cent of the cost in passenger services and around 37 per cent in suburban services. Class-wise, only the AC III tier fetches it a profit, but that is neutralised by the losses from other classes. The social service obligation of the Railways, excluding staff welfare charges and law and order expenses, comes to around Rs 24,000 crore.