Lalus folly

Updated: Nov 29 2004, 05:30am hrs
Old habits die hard. But in the case of the Indian Railways (IR) their persistence with old ways is incredible. At the slightest pressure on their finances, IR thoughtlessly hikes freight charges. And, they have done it again. The impact of government intervention has been so unfortunate that it can be termed confiscatory and cannot stand legal and/or economic scrutiny in a marketdriven economy.

In fact, with the financially suicidal policy of freight subsiding passenger services, freight rates are extortionist in nature and have driven freight traffic onto the road. IRs freight rates are the highest in the world and the passenger fare-freight ratio one of the poorest. The average rate per tonne km is nearly 3.5 times the rate per passenger km. Passenger fares have been continuously and also increasingly underpriced while freight has always been overpriced. And, if one were to take a train as a rough unit of cost, the rate per passenger km should be higher than the rate per tonne km instead of being only a third. There is, therefore, a strong case for reducing freight rates or at least not to raise them till the revenue per passenger km equals, if not exceeds, revenue per tonne km.

As it is, IR provides a high cost service, highly deficient in quality, and is uncompetitive. The recent selective increase in freight charges will worsen the situation. Such a freight rate policy will militate against IR retaining its marketshare, let alone regaining some of the lost traffic. Its time for IR to adopt bold measures to rebalance passenger and freight tariffs and formulate an economically sound tariff structure.

The author is former member (traffic), railway board