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Railways need to rationalise fare and freight structure to earn enough revenue
Article Date: 
Feb 26 2013, 2135

Populist budgets unveiled year after year by various railway ministers have dealt a spiteful blow to the Indian Railways. Mounting losses, lack of modernisation, increasing safety concerns, inadequate capacity augmentation, poor service quality, and several other issues, have throttled railways, which operates the fifth biggest railway networks in the world. Thus, hopes of a pragmatic and futuristic budget were high when Congress Party got an opportunity to present a rail budget after 17 long years. Railway minister Pawan Kumar Bansal, who effected an across-the-board hike in passenger fares only a month ago and helped railways net Rs 6,600 crore annually, seemed to have paused for a while, though another round of passenger fare hike, if only marginal, was widely expected. This, especially when losses have mounted to Rs 24,600 crore in 2012-13, up from
Rs 22,500 crore in 2011-12. While no passenger fare hike was announced in the budget, the move towards adopting a limited fuel adjustment component in freight rate effective from April 1 will help railways pass on any increase in fuel costs. The minister has projected gross traffic receipts at
Rs 143,742 crore, around 14 per cent higher, with freight expected at
Rs 93,554 crore, higher by 9 per cent, and passenger fare at Rs 42,200 crore, higher by around 5.2 per cent. Both the targets look a bit ambitious given the economic slowdown the country is facing now. Passengers are happy to see railway’s move to embrace technology towards improving services on various fronts — from ticketing to station improvement to food quality control to improvement of warning systems. Given that India’s rail fares are among the lowest in the world, there is adequate room for the government to hike passenger fare again, in order to reduce cross-subsidisation by freight revenues. If railways has to focus on the most important aspects of safety, service quality and capacity addition in rakes and railway lines, it cannot afford to bank on minor freight hike any longer. It is time for the government to stop cross-subsidising passenger fare with freight revenues, and get on with passenger fare hikes. New passenger segmentations such as anubhuti (special coaches with luxurious service in select trains) can be effectively used for fare hikes. Another important aspect is inviting private investments. Out of the Rs 5.19 lakh crore investments envisaged for railways in the 12th five-year plan (2012-17), Rs 1 lakh crore is being aimed to being mobilised from public-private partnership (PPP) projects. These cover a wide array of activities such as dedicated freight corridor (DFC) projects, redevelopment of railway stations, power generation and energy saving projects, freight terminal operations, setting up of wagon and locomotive units, gauge conversion and network expansion, among others. The minister has also proposed to invest
Rs 3,800 crore for port connectivity projects. This comes on the heel of railways releasing a draft policy on setting up rail terminals at private ports, to provide connectivity from the nearest suitable railhead to the terminal, with the port authority having the concession for 30 years. This will certainly give a fillip to movement of cargo, especially coal and iron ore. India, according to the minister, is expected to join China, Russia and the US during the financial year for carrying over 1 billion tonne freight on rail. Railways can bring in much more revenues through freight carriage if the ministry finalises the policy and moves ahead quickly.

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