The last major fare hike was in 1999, and although three hikes were effected afterwards, one was rolled back. In these 15 years, the WPI has increased 70 per cent. Thus, the railways estimate that at least a 50 per cent hike is necessary to target under-recoveries. In other words, even the current hike, effective from June 25, is not enough and more measures are needed. While the fuel adjustment charge, introduced last year, ought to allow automatic fare readjustments as international crude prices change, the government needs to urgently set up a rail tariff authority (RTA). An RTA with full powers to set prices binding on the railways is necessary to de-link tariffs from political considerations and protect the railways from populist adventurism in future.
The fare hike was announced less than a week after Prime Minster Narendra Modi spoke in Goa of the need to take tough decisions to revive the economy that may cause short-term hardships but promise long-term gains. The government also needs to politically communicate the necessity for such decisions, and the rationale behind them, to the people. A roadmap now needs to be drawn up for involving the private sector to help the railways evolve into a safe, comfortable, lean and efficient 21st century service that is also an engine of growth.