The government might be looking to replicate the success of its #GiveItUp campaign for LPG subsidy for Railways fare subsidies, but that may prove to be a different ball game altogether. Under-recoveries across classes in both non-suburban and sub-urban rail services, the concessions given to specific groups (non-suburban) and resulted in a loss of a little over Rs 33,000 crore in FY15. Thus, the government planning a campaign to get passengers to renounce subsidies should seem to be a good idea. As per The Times of India, “giving up” will be offered in two slabs—50% and 100% of the subsidy amounts.
The bulk of the operating losses to the passenger business of the Railways comes from under-recovery across classes in non-suburban and suburban services. It is likely that first and second AC passengers—first AC fares are comparable with flight fares—will be able to afford a full charge, or an increased charge if they opt for the 50% subsidy surrender. But, while it is true that the Railways incurs a loss in the first and second AC segments, and makes a profit in third AC, it is the sleeper and the second class (largely unreserved) passenger segments where under-recovery hits it the hardest—a study on Railways’ cost of fulfilling “social service” obligations by NITI Aayog’s Bibek Debroy and Kishore A Desai shows these segments in mail/express and ordinary trains accounted for Rs 27,776 crore of the total Rs 27,779 crore operating losses the non-suburban service incurred in FY15. In fact, Debroy-Desai point out that for the Delhi-Lucknow route, fares in sleeper and second class work out to less than half of what bus services offering comparable standards of travel charge. The suburban and Kolkata Metro service, for their part, accounted for a loss of Rs 4,679 crore. Given the likely income bracket of the passengers in these classes, it seems doubtful that the government will be able to get passengers to give up the subsidy where it matters the most; perhaps, homeopathic fare increases could work better. That said, the Railways could cut losses if it were to shed a bulk of its first and second AC segments and offer more third AC coaches, since that is where the profits are.