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Rail Fares & Frieghts Hike
Jun 21, 2014

Get ready to pay more for train travel. The government administered its first dose of harsh economic medicine in the form of a sharp increase in rail fares that could presage a budget that will eschew populism in favour of fiscal consolidation.  The railways sought to correct the long running distortion in the fare structure by hiking passenger fares by 14.2 per cent across all classes and freight charges by 6.5 per cent. Of the total increase, 4.2% and 1.6% is the fuel adjustment component respectively in passenger and freight charges that goes up or comes down in line with fuel prices. 

The previous government had decided to hike fares from May 20, but its implementation was stayed because the announcement was made on the same day as declaration of election results. 


The hike in passenger fares will help pare down the diversion of profits from the freight to passenger segment. Successive Governments have shied away from biting the bullet on passenger fares because of fears of public dissatisfaction.  As a result, passenger hikes in previous years, especially in the more patronised second class and suburban travel, were either rolled back or of amounts that were lower than planned. 


This increase will help Indian Railways raise an additional Rs. 8,000 crore in the financial year. Successive governments have been unwilling to risk unpopularity and raise passenger fares while treating the loss-making utility as a means of doling out largesse in the form of new trains. Meanwhile, safety, quality and passenger comfort have suffered. 


This increase will partially restore railways financial health in both mid and long terms. For now, it will leave an adequate amount to modernise existing infrastructure and build new one. In the long term it will help stave off the financial predicament faced by the country's largest single employer when the Sixth Pay Commission was announced. The Indian railways ferried about 600 crore passengers every year. 


 

 


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