With Indian Railways’ traffic receipts struggling to grow and a shift to commercial pricing in the passenger segment easier said than done, the transporter has intensified the efforts to augment its so-called non-farebox receipts
With Indian Railways’ traffic receipts struggling to grow and a shift to commercial pricing in the passenger segment easier said than done, the transporter has intensified the efforts to augment its so-called non-farebox receipts — it has set an ambitious target to up its advertisement revenue from an estimated Rs 1,700 crore this fiscal to Rs 10,000 crore by FY20. The bulk of the incremental revenue is expected to come from advertisements to be displayed on over 2 lakh LED screens being installed at stations and platforms. Other eye-catching spaces available in the railway ecosystem like trains and stations would also be more liberally offered to advertisers.
According to official sources, the tenders for installing the LED screens and managing them will be floated soon. The transporter, the sources added, was also looking at data monetisation — passenger information made available free of cost now through IRCTC portals may soon come with a small cost — sponsorship of activities and events at station premises and building pay-and-use toilets on land outside stations to boost non-traffic receipts, which termed as “sundry earnings” currently make up just over 3% of its overall receipts. Other ideas being mooted include
exploiting space rights over station buildings, sponsorship of uniforms for personnel, commercial farming alongside tracks, etc. The transporter’s plans for raising non-farebox revenue is so exhaustive that it is even planning to sell garbage generated at stations.
Although IR’s plan to increase non-fare revenue from 3% now to 10% in the medium term is perfectly legitimate — its counterparts in Europe and Japan already have such revenue between 15% and 30% of total receipts — analysts have doubted the targets being set for ad revenue. “It is definitely a very ambitious target. A lot will depend on the kind of ad rates which will be charged, and whether advertisers will be ready to pay that kind of money,” said Mallikarjun Das, group CEO, Starcom India, a media planning and buying agency from the house of Publicis Media.
According to a Ficci-KPMG 2016 report, India’s media and entertainment industry is expected to grow to Rs 1,31,500 crore by December 2016. In 2015, its was Rs 1,15,700 crore, with advertising revenue of Rs 47,500 crore. It should be noted ad revenue from TV for 2015 stood at just Rs 18,130 crore, while ad revenue from out-of-home stood at Rs 2,440 crore. Rail ministry sources, however, sounded optimistic; they said that with 800 crore passenger bookings annually and average footfall of 4 million on platforms, advertisers would indeed be willing to pay a premium to reach such a volume of captive audience.
“The revenue sharing model and the details of (the LED screen) project will be out soon and we are hoping that a consortium of TV manufacturers and advertising agencies will take part in the competitive bidding process. W are still contemplating on whether we want to divide the tenders among different zones or give it as a complete bundle,” the railway official added.
Pratap Bose, chairman and co-founder, The Social Street, an integrated advertising agency, said: “It will never be a national level play for the railways, rather these televisions will be used more by local retailers to advertise about their products and services. In such a scenario the ad rate will not be more than Rs 500-1000 for per 10 second.”
“A 10-second ad spot on a Hindi general entertainment channel during prime time costs about Rs 1,50,000-2 lakh and on Hindi news channel, Rs 15,000-20,000. However for the railways it will be difficult to command such high ad rates as advertisers usually pay a premium for the number of eyeballs a show generates on a channel. In this case the railways will have different a consortium for different regions or cities. Hence, the 2 lakh TV sets being installed will never be able to show one ad at the same time,” Bose added.
The railways’ gross traffic receipts (GTR) stood at Rs 1,63,384 crore in FY16, 2.6% below the projections made at the start of the year. It is looking at a 13% growth in GTR to Rs 1,84,819 crore in FY17.