Needlessly railing against fare hike

A surfeit of politics in the country today vitiates the environment necessary for rational, economic and strategic decision-making. A critical national asset such as the Indian Railways has been rendered a mere pawn for petty politicking. Its condition has been on the decline, even as railroads across the world are being rejuvenated to occupy centrestage in transport infrastructure.

Instead of lauding the long overdue reversal of the decade-old freeze on rail passenger fares, a myopic political dispensation clamours for the rollback of the fare increase announced by Railway Minister Pawan Bansal. Again, the protest against the pre-Rail Budget fare hike is untenable: rail fares and freight charges constitute no tax; they represent prices for the Railways’ services. Those who claim to champion the cause of the aam aadmi by arguing for status quo on irrational rail fares remain purblind to the great damage they unwittingly inflict on the institution, in the process hurting interests of passengers. Millions of rail travellers deserve a far better deal, for which the Railways must garner adequate resources in order to expand, accelerate, and modernise its infrastructure and services.

FREIGHT-PASSENGER MIX

For induction of new technologies and systems for safe operations to ensure clean and comfortable travel, the Railways needs to invest large sums. The Sam Pitroda and Anil Kakodkar committees have strongly argued for an investment of the order of Rs 6,60,000 crore over a five-year period. It is evident that, within the affordability constraint of the population, the Railways must be able to earn and save for investment.

While there is an almost insatiable demand for more trains, the Railways’ arterial routes remain choked, its stations and maintenance wherewithal are over-stretched; speeds remain low and services far less than satisfactory. Rail tracks carry both freight and passenger trains; the more the number of passenger trains on a route, the less the room left for freight trains. And freight trains are critical for the country’s economic, industrial and agricultural needs, and no less crucial for the Railways’ own financial health.

The Railways realises annual revenues of the order of Rs 28,000 crore from its passenger business, and incurs a loss of Rs 25,000 crore. Although passenger services aggregated 61 per cent of its total traffic units (passenger km and freight tonne km) in 2010-11 and freight 39 per cent, earnings were inversely proportional: Rs 25,706 crore from passenger traffic and Rs 60,687 crore from freight.

Whereas net freight train earnings averaged an amount of Rs 599.91 per km, passenger trains caused an average net loss of Rs 334.68 per km. In 2010-11, in the non sub-urban segment, the second class ordinary (other than mail/express) suffered a loss of Rs 7,000 crore, mail/express sleeper class Rs 6,100 crore, mail/express second class Rs 4,000 crore, sleeper class ordinary Rs 400 crore, and AC-I and II Rs 400 crore; the suburban business accounted for a loss of Rs 2,300 crore.

The second class ordinary costs the Railways 42 paise per passenger km (pkm), but it is priced at 17 paise/pkm; likewise, mail/express sleeper class fetches only 32 paise/pkm against the operating cost of 62 paise/pkm; and mail/express second class 22 paise/pkm against the cost of 36 paise/pkm. The fare hike just notified by the Railways would help it raise its income by only about Rs 6,600 crore over the entire year. In fact, just to break even, minimum rail fare increase required is of the order of 400 per cent for ordinary sleeper class, 125 per cent for ordinary second class, 75 per cent for mail and express second class, and 150 per cent for suburban services.

The absurdity of rail fares can well be discerned: a monthly season ticket with unrestricted number of suburban journeys in a day is charged for just 12 single journey fares; a season ticket for up to 150 km journeys on the Mumbai suburban rail network each way, valid for three months, costs a princely sum of Rs 450. Even if only one journey is undertaken on this ticket in a day, the fare amounts to 6 paise per km!

In comparison, the bus fare on state road transport services across the country in 2010-11 averaged as much as 56 paise/pkm.

The Railways has relentlessly increased freight charges, out-pricing itself in the freight market. If it continues to over-price its freight services for garnering more revenues to keep its head above the water, it would eventually kill the goose that lays the golden egg and, in fact, cast a heavy, though indirect, burden on the population in terms of high delivered cost of essential commodities of daily need.

GLOBAL COMPARISON

The level of cross-subsidisation of passenger services by freight earnings rose from 20 per cent in 2004-05 to 32 per cent in 2009-10. The ratio of average passenger fares to average freight rates on the Railways is 0.3 in comparison with 0.9 in Indonesia and Malaysia, 1.2 in China, 1.4 in Republic of Korea, for example.

The Railways’ unsustainable passenger fares are way lower than on most other railway systems, for example, purchasing power parity-adjusted rail fares in Japan are 9.4 times, in Russia 6.7 times, in Germany 6.2 times, and in China 2.7 times in comparison with those in India.

Inadequate wherewithal on the Railways has led to debilitating distortions in the modal mix which bodes ill for environment, energy consumption, and land use. Between 1950-51 and 2000-01, roadways grew at a CAGR of about 9.42 per cent, and railways at a much slower rate, of 3.93 per cent.

This resulted in roadways becoming the principal passenger carrier in the country. While the Railways was the nation’s predominant transporter in 1950, with a share of 89 per cent of all freight and 74 per cent of passenger traffic, it is now a peripheral player, moving only 10 per cent of the country’s passenger traffic and less than one-third of its freight. Now, road transport accounts for almost 90 per cent of the country’s total passenger traffic. Rail travel demand far outstrips supply, and remains set to further grow substantially in view of the country’s continental distances, its rapidly growing middle-class, and urban population projected to rise from the current 286 million to 575 million by 2030. The steadily growing services sector continues to trigger high mobility and demand for passenger travel, generally in upper classes.

As declining agriculture drives migration from rural areas, the Railways needs to facilitate large numbers to travel long distances cost-effectively, for an integrated national labour market.