Article by RC Acharya

Indian Railways is perhaps, the cheapest rail

transport system in the world with an average
revenue per passenger, per kilometre of Rs 1.9 for
upper class, 27.47 paise for second class
mail/express, 14.54 paise for ordinary second class
and a mere 13.80 paise for suburban trains.

Averaging 30.78 paise per passenger, per kilometre

for all classes, a train carrying 1,500 passengers
would earn just over Rs 450 per km. On the other
hand, revenue earned from coal which constitutes
over half of the freight carried by the railways is Rs
1.2 per tonne km. And a train carrying 3,700 tonnes of
it would garner about Rs 4,500 per km. This is 10
times the revenue earned by a passenger train.

This simple arithmetic seems to have eluded our

worthy netas, who have adorned the corner room in
the Rail Bhavan for years. In the euphoria of extreme
populism, they have merrily gone on announcing new
passenger trains each year, adding over 2,500 new
trains and taking the total to over 12,600 of which
about 7,900 trains are long-distance, non-suburban
trains.

Sharing the same track with these passenger trains

are about 7,400 freight trains that have to,
understandably, give priority to Rajdhani, Shatabdi
and other superfast trains, resulting in their
registering an average speed of just 25 km per hour.

This is not a very attractive option for a shipper, who

would like to transport his goods at a much faster
speed than that offered by the railways. As a result,
high value goods have increasingly moved over to the
road sector, which in spite of serious delays and
impediments at state borders has captured over 74
per cent of the nation’s freight traffic a market share
the railways enjoyed in 1951.
In addition, the rampant populism over the last two
decades, which stalled any routine hike in passenger
tariff, resulted in freight tariff being increased
annually, often mid-year, thereby upsetting shippers’
long-term plans.

Facing mounting criticism over the railway’s

functioning, particular its financial health, all railway
ministers have, over the years, formed committees
with varied mandates, making Indian Railways
perhaps one of the most studied transport systems in
the world.

There have been no less than six committees ordered

in the last two years alone, and the one headed by
D.K. Mittal submitted its 76-page report last month.
Recently superannuated as revenue secretary, Mr
Mittal’s quest to find ways and means of “improving
the financial health of Indian Railways” was aided by
representatives of railway PSUs like Ircon, Rites and
Concor, and top management entities like Boston
Consultancy Group India Ltd., McKinsey & Company,
Ernst & Young and KPMG.

In a hectic three weeks, it met dozens of

stakeholders, including Steel Authority of India
Limited, National Thermal Power Corporation, Ficci,
CII, Assocham, the ministry of commerce, and Coal
India. It also interacted with Indian Railway Catering
& Tourism Corporation, Rail Vikas Nigam Ltd, Railtel,
Centre for Railway Information Services and some of
the zonal general and divisional railway managers.

Long and short term recommendations were made by

four working groups covering passenger and traffic
services, freight traffic services, monetisation and
additional resource mobilisation, long-term finance,
productivity and efficiency. It is now upto the Railway
Board and railway minister Suresh Prabhu to take a
call on these recommendations.

On top of the list is the completion of 24 corridors and

seven feeder routes, which will require Rs 95,000
crore (excluding electrical signalling and telecom
work) for completing the projects and another Rs
65,000 crore to optimise the output of these corridors
a whopping Rs 1,65,000 crore in total. Meant for
doubling, gauge conversion, new lines, electrification
and signalling etc. these are vital for carrying
increased levels of freight, which is the bread-winning
business for any rail transport system.

The report also points out that the present level of

funding is just Rs 30,000 crore a year and an
additional amount of Rs 1,50,000 crore would be
needed for the next three years. In order to correct
the skewed tariff structure that has resulted in the
loss-making passenger business and is bleeding the
railways dry, the report suggests the creation of an
empowered committee for a regular review of tariff
and to achieve recovery of the cost of operations.

Also recommended is a policy framework, whereby

fares can be increased at 25 per cent of the consumer
price index, announced by the Reserve Bank of India
on a quarterly basis. In addition, a two paise per km
hike for second-class fares, including suburban and
inter-city trains, till break-even point is reached, has
been suggested.

After boldly announcing a hike in passenger tariff last

year, the then railway minister, Sadananda Gowda,
had to back-track with respect to suburban services,
as Mumbaikars were up in arms and the Shiv Sena
was only too happy to go on the war path on their
behalf.

Hopefully, Mr Prabhu will not share the same fate if

he decides to firmly grasp the passenger tariff nettle
while presenting his maiden rail budget on February
26.