"The passenger services have been subsidised by the freight traffic. In recent years, even freight fares have come under pressure," he said in his first reaction to the 14.2 per cent increase in passenger fares and 6.5 per cent hike in freight rates.
Stating that the choice before the government was to allow the railways to bleed and eventually walk into a debt trap or raise fares, Jaitley said, "India must decide whether it wants a world-class railway or a ramshackle one.
"The railway minister has taken a difficult but a correct decision...The Indian Railways for the last few years have been running at a loss. The only way that Railways can survive is when users pay for the facilities that they avail."
Jaitley, who will present the Union budget next month, said a loss-making railway would provide below-par services and would eventually not even have the resources to meet its expenditure.
In a Facebook posting titled 'The Truth of Railway Fare Hike', the minister said the decision to increase the rates was mooted by the Railway Board on February 5, when the United Progressive Alliance was in power. The board proposed a 5 per cent increase in freight rates and a 10 per cent increase in passenger fares.
The proposal was to rationalise freight rates with effect from April 1 and passenger fares with effect from May 1, he said.
"Even as the Interim Budget of the Railways was yet to come, the date May 1, 2014, was chosen hoping that the general elections would be over by that day. The railways had proposed that this increase would give the railways an additional revenue of Rs 7,900 crore.
"Armed with this decision, the then Railway Minister Shri Mallikarjuna Kharge met the then Prime Minister Shri Manmohan Singh on February 11, 2014. The then Prime Minister approved the hike and suggested that both freight and passenger fares should be implemented with effect from May 1, 2014, itself," Jaitley said.
The Railway Board, Jaitley said, accordingly notified this increase on May 16, when the election results were being declared. The decision gave effect "to what the Railway Board, the Rail Minister and the then Prime Minister had concurred."
However, Jaitley added, then Railway Minister Kharge "developed cold feet and in the evening of May 16, 2014, even after the UPA had been defeated in the elections, he countermanded the order of the Railway Board so that theoretically the decision taken by him and the then Prime Minister is implemented by the Railway Minister of the NDA government."
Jaitley said that by withdrawing the countermanding order, current Railway Minister D V Sadananda Gowda has taken a challenging decision.
"The choice before Shri Gowda was whether to allow the Railways to bleed and eventually walk into a debt trap by following the policy of the UPA government or implement the decision which the UPA government had taken to increase the fares for both passenger and freight but did not have the courage to implement."
Congress hits out at Jaitley over remarks defending rail fare hike
Congress today took a dig at Finance Minister Arun Jaitley for saying that the steep hike in railway passenger fares and freight rates was a 'difficult but correct decision".
Latching on to a purported tweet by Narendra Modi last year on the issue of railway fare hike in which he is said to have remarked that "issues like price rise don't concern them (Congress)", the party's Communication Department Chairman Ajay Maken questioned the NDA government's stand on the matter now.
"Issues like price rise don't concern them. They don't want to solve anything because of their arrogance" Modi Ji tweeted-26/10/13, What Now," Maken said in a tweet today.
Talking to reporters at AICC, Maken further said, "Does what Jaitley said today also smack of the same arrogance which Modiji had mentioned in 2013"
Talking about the 14.2 per cent increase in passenger fares and 6.5 per cent hike in freight rates, Jaitley had said that the railways can survive only if users pay to avail facilities.
"The passenger services have been subsidised by the freight traffic. In recent years, even freight fares have come under pressure," he had said.