Instead of hidden fare hikes, the Indian Railways should listen to the Parliamentary panel and develop a transparent, competitive pricing model to fight competition and increase passenger and freight traffic.
It can’t be anybody’s case that the Indian Railway fares should not be raised even if it is required to meet the expenses.
But, that is not the complete story — the fares have to be competitive also to attract adequate passenger and freight traffic.
The Parliamentary Standing Committee on Railways headed by former minister of Railways Dinesh Trivedi in its report presented on Monday has rightly pointed out, “…for arresting the trend of falling volumes and productivity, margins and market shares the Railways would have to be completely market-driven and customer centric and adopt dynamic and differential (depending upon the relative competitive strength of Railways) pricing strategy so that ambitious targets of GTR (Gross Traffic Receipts), passenger and freight volumes and earnings growth would be achieved in 2016-17.”
The panel has also done well by desiring that the ‘ministry should be more forthcoming in their tariff pronouncements’.
While there is a general perception that the Railway fares have not been hiked much, the panel has found that the passenger fares and freight rates have been increased across the board by 40-65% ‘even in segments where it is vulnerable to the competitors in the market place’.
In the last five years (2010-15), the committee has interestingly noted: “…various charges like cancellation, reservation, tatkal, superfast surcharge, MUTP surcharge, Mela surcharge and freight rates have been increased to the tune of 27% to 100%, which are not reflected in the Budget Speech.”
This, however, has not helped much. In FY16, the GTR registered a shortfall of Rs15,744 crore (8.57%) from the target due to the lower realisation of both freight loading and passenger traffic.
The parliamentary panel is of the view that ‘sharp deterioration in the competitive strength of Railways in its AC-I and AC-II passenger business, and in finished products like Petroleum, Oil and Lubricants (POL), Cement, Steel etc. are also the factors for falling volumes in Railways’ passenger and freight segments’.
From a small fraction of Indian Railways AC business in early 2000, domestic air travel has reached to a situation in the last 15 years, where the number of domestic air travelers ‘is over 50 times the number of AC-I and 6 times AC-II passengers of Railways’.
“The combined AC business (of all the 4 classes i.e. AC-I, AC-II, AC-III and AC Chair Car) is smaller by 20% as compared to domestic air travel business. While domestic air travel has grown by double digits over the last few years and 15% during 2015-16, Railways AC passengers of all the 4 classes registered a negative growth last year,” the report has outlined.
The freight segment is also losing out to competition from the road transport.
So, instead of finding ways to increase fares to improve its financial situation, the Railways need to look at realistic pricing of its services even if it is a tough call.