For the unreserved ordinary sleeper class on the Indian Railways network, the national carrier’s loss is as high as 80% of the cost incurred. And for categories such as the reserved first class and unreserved ordinary second class, the losses are up to 70% of the cost. Across all categories, it is only the air-conditioned (AC) 3-tier category which gives a slight positive return of 7.5%.
Two separate committees headed by DK Mittal and Bibek Debroy had earlier pointed out that AC 3-tier is the only profit-making segment in the heavily subsidised passenger category. While the unreserved ordinary second class at around 4,20,000 million passenger kilometre is the highest travelled category, reserved second class in mail and express trains is a close second with around 3,47,000 million passenger kilometre followed by the reserved sleeper class in mail and express trains at 2,37,000 million passenger kilometre.
The overall loss due to subsidised passenger business, or the social obligation cost, for the railways is Rs 30,000 crore-plus every year. On the back of the Indian Railways implementing surge pricing on select categories of trains and introducing new categories, the national carrier was able to increase its passenger earnings by Rs 1,996 crore in 2016-17 compared with 2015-16. The revised estimates for 2016-17 of Rs 48,000 crore were still unmet as it managed to garner Rs 46,279 crore.
The burden of social obligation cost, apart from high staff cost, has led the railways to report an operating ratio of 97 for 2016-17, worst in the last 16 years, against its revised target of 94.9. A close look at the zone-wise data for operating ratio shows that zones with dense passenger traffic movement report the highest amount of losses, as reported by FE earlier.
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The Debroy committee in its report had said almost 80% of losses in passenger operations in any year is due to non-suburban operations including mail, express and ordinary classes. And out of the losses, a miniscule 4% can be attributed to various concessions, but a lion’s chunk of as high as 76% is due to the railways charging fares lower than the actual cost of operations.
According to a railway official who requested not to be identified, a 10% hike in passenger fares across all categories can make the railways earn additional Rs 4,500 crore. Also, the Comptroller and Auditor General of India (CAG) in March 2017 had observed that the railways should increase passenger fares in order to make its operations profitable.