In a relief to Indian Railway Catering and Tourism Corporation (IRCTC), the finance ministry has offered to reimburse the railways arm around Rs 80 crore to offset the losses due to waiver of service charges on tickets booked online through its portal. Though IRCTC is forgoing an estimated Rs 600 crore per year on this account, the amount being reimbursed is only the actual cost of online ticketing operations and not the margins made by the firm, sources told FE. The ministry’s gesture has hopefully removed a hurdle in the way of IRCTC’s planned initial public offering.
“In the earlier model, of the Rs 600 crore IRCTC used to collect as service charges annually, 50% used to go to the railways and the balance was retained by IRCTC. However, since processes are now mostly computerised, cost of operations has reduced,” said a ministry of railways official, adding that the reimbursement amount could therefore be in the range of Rs 80-100 crore. The service charges were removed with effect from November last year. It is not immediately clear if the ministry will bear the cost of online ticketing services for every year. After the demonetisation of old Rs 500 and Rs 1,000 notes in November last year, IRCTC was asked not to charge customers for online ticketing service in order to promote digital transactions. While initially the directive was to not levy the charge till June 2017, the timeline has been revised twice since and customers will not be charged the levy till March 2018. IRCTC used to charge Rs 20 on each sleeper class and Rs 40 on each air-conditioned class e-tickets. It also collected Rs 80 for sleeper class and Rs 120 on all other classes of i-tickets. The issue of service charge has also slowed the process of the firm getting listed, which was initially planned within this financial year. “The minister (Piyush Goyal) wants the business model of IRCTC improved before the launch of the IPO,” said the official.
The government plans to list at least three other railway PSUs — Indian Railways Finance Corporation, Ircon International and RITES — within the current financial year. The valuation of IRCTC has dipped as its main source of income was cut without an alternative mechanism in place. “After it gets the reimbursement, IRCTC will at least be rest assured that it will not make losses from the ticketing business. However, the valuation will not be same as it was earlier,” added the official. Earnings from the ticketing business form the mainstay of IRCTC. As per its annual report of 2015-16, 43% of the total income came from this segment followed by 26% from tourism and 23% from catering. The company, however, may see an increase in its turnover given that the catering policy announced in February 2017 handed over catering services to IRCTC for setting up new mechanised kitchens and fixed rates for meals on-board trains.