The Comptroller and Auditor General of India (CAG) has urged the Indian Railways to have a relook at its passenger fares in order to reduce its losses in the segment. In a report tabled in Parliament on Tuesday, the CAG said, “Ministry of railways needs to revisit the passenger and other coaching tariffs so as to recover the cost of operations in a phased manner and reduce its losses in its core activities. The fixation of passenger fare and freight charges should be based on the cost involved so that it brings both rationality and flexibility in pricing considering the financial health of railways and the current market scenario.” The transporter at present cross-subsidises low-passenger fares through freight charges, which in turn is also driving away freight to a cheaper alternative — roadways. The loss on account of passenger fares — known as social obligation cost — comes to more than Rs 30,000 crore per year. As per the report, the loss on this account for 2015-16 stood at Rs 36,286.33 crore. The transporter has not increased passenger fares — a politically sensitive issue — in more than eight years.
The CAG report noted that there is no “justification for not fully recovering the cost of passenger services in case of AC (air-conditioned) first class, first class and AC 2-tier. However, since one of the factors for non-recovering full cost from these classes could be issue of free and concessional fare passes/tickets to various beneficiaries in good numbers, this practice needs to be scaled down”. Of all the classes of travel offered by the railways, only AC 3-tier is profitable and all others make losses. The recommendation follows a suggestion by the Prime Minister’s Office (PMO) last year in which it had recommended a “creeping increase” in passenger fares.
The auditor has also suggested that the railways work on improving its operating ratio (OR) — the amount of money spent to earn every Rs 100. The OR deteriorated to 96.50 in 2016-17 though in 2018-19, there are plans to improve it to 92.8%. In a separate report, CAG noted blocks demanded by the engineering department for maintenance works were not fully made available, and where made available, these were not optimally utilised.