In order to tap non-farebox avenues for revenue enhancement, Indian Railways on Mondayappointed global professional services provider EY to undertake a six month study to tap the advertising potential of stations and trains.
In order to tap non-farebox avenues for revenue enhancement, Indian Railways on Mondayappointed global professional services provider EY to undertake a six month study to tap the advertising potential of stations and trains. Sources in the ministry of railways state that EY will develop a pricing strategy after evaluating the transporter’s assets, which will be later flagged to advertisers spread across India. The consulting firm will help Indian Railways bag Rs 500 crore of advertising contracts.
The Ministry of Railways had entrusted RITES to engage a suitable consultant and co-design strategy to enhance revenue through advertising assets. “We are looking at generating around Rs 2,000 crore through advertising alone in the next fiscal.” a senior railway official said. The transporter currently generates around Rs 250 crore through advertising, which is limited to advertisements on train wraps and display spaces on stations.
“This is a good move by the Indian Railways, focus on generating revenue through non-farebox avenues will be the transporters thrust area in the future. Land monetization, advertisements and providing differentiated services in passenger and freight segments are promising areas for revenue generation.” Abhay Krishna Agarwal, Partner Infrstructure & PPP at Ernest & Young LLP said.
This step by the transporter comes at a time when the railways is facing an overall revenue loss (against the target) of about Rs 11,700 crore up to December,2015. Due to a sluggish core industries growth, revenue growth for the transporter is going to be much lower than the budgeted 15% for the current fiscal year. Up to December the national transporter has only managed to generate around Rs 80,977 crore in freight revenue, missing its internal target by 8%. IR has also missed its internal targets for freight loading by 7.23% up to December,2015. Another cause of concern for the transporter is the trend of dip in its ridership, ministry data reveals that IR’s ridership has reduced by 2% up to December,2015 compared to the corresponding period last year.
“The railway minister is not keen on increasing passenger fares or freight tariffs, our major focus now will be on generating revenue from other sources mainly; advertising, modified parcel leasing policy, export of railway equipment, land monetisation and cutting of working expenses,” said a senior railway official.