Indian Railways: Addressing the gap between the rich and the poor


Revenue generation for Indian Railways is very important, as it cannot survive without increased revenues. The public, in general, is in the habit of criticising every price increase by railways without considering that the price increase is a compulsion and ultimately, is in the interest of the public itself, however indirectly.

Railways are the backbone of the nation and economy, and it cannot go on without increasing the prices with growing inflation. Existence of Railways is important on account of many factors. One of these is that Railways is the biggest employer also. Considering the indirect employment, the railway provides through the creation and maintenance of infrastructure; perhaps no other organisation can match Indian Railways, as far as employment generation is concerned. Thus, the nation’s employment ratio is heavily dependent on Railways.

Till now, Indian Railways has struck a laudable balance between price increase and burden on the poor, and it does deserve kudos for the same. Few people know that Indian Railways recovers only 57% of the cost of travel on an average. No organisation can run on losses for a very long time and time is ripe that Indian Railways also find ways to increase its revenues and offset the losses.

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The Indian railway’s charges fees on cancellation of tickets, which is a justified practice and is established in any service sector. If one books a hotel or flight or restaurant, similar cancellation policies are the norm everywhere. Indian Railways hiked the cancellation charges nearly to double since November 2015. There were various justifications behind this. Some of the justifications, among other things, are checking touts and increasing public convenience.

Indian Railways have been suffering from losses; traditionally, they must find new sources of revenues. While deciding on this, they have always taken care of their poor customers and in this way, have done their duty towards the Nation. This time (while increasing the cancellation charges), their balance between the rich and the poor does not seem up to the mark. The revenue generation ideas should be such, as should be heavy on rich passengers and should have the least impact on the poor ones. There is no harm in subsidising the poor out of the revenue generated from the rich.

Indian railways have been successful in increasing its revenues on this count (increased cancellation charges), which is good news and is crucial for keeping Indian Railways going. It is also crucial for strengthening the rail infrastructure and increasing the amenities for the public.

As per the New Indian Express, “From cancellation charges, Indian railways earned in 2017-18 Rs 1,205.96 crores., which increased to Rs 1,852.50 crores. In 2018-19. In the same manner, Southern Railway earned Rs 176.76 crore in 2017-18, which jumped to Rs 182.56 crore in 2018-19. Shockingly, ticket cancellation revenue of the neighbouring South Central Railway whose jurisdiction currently spreads over Telangana, Andhra Pradesh and parts of Maharashtra and Madhya Pradesh has jumped from Rs 127.22 crore to Rs 690.80 crore — 500 per cent increase”.


Some of the cancellation rules are: If a confirmed ticket is cancelled more than 48 hours before the scheduled departure of the train, flat cancellation charges shall be deducted at the rate of Rs 240/- for First AC Class/ Executive Class, Rs.200/- for 2 tier AC, Rs 180 for III AC / AC Chair car / 3 AC Economy and Rs120/- for Sleeper Class. For Second Class, Charges are Rs 60/-. Cancellation charges are per passenger. 

As is evident from the above, charges for AC classes are not much higher in comparison to sleeper class. While we know that the status and income of an AC class passenger is many times more than that of a sleeper class passenger, it would have been worthwhile to address that gap in cancellation charges also. A typical formula could be that AC 3 class passengers should bear double of sleeper class, AC 2 Class passenger should bear one and half times of AC 3 class, and AC First class passengers should bear double of AC 2 class. In a tabular form, it can be represented as under.

Class Cancellation charges
Second class Rs x
Sleeper Rs 2x
AC 3 Rs 4x
AC 2 Rs 6x
AC 1 Rs 12x

Though increasing cancellation charges is not a bad idea, the gap between the rich and the poor need to be properly addressed.

Further, there is a need to see the two justifications discussed above with some other angles also. We can discuss them as below.

Justification of Discouraging touts:

It is assumed that high cancellation fee will be a discouragement to touts, as in case they fail to sell it, they will have to bear hefty cancellation fees.

This is an example of “when buffaloes fight, the crops suffer”. Here, crops represent the poor public. Instead of finding a better way to check touts, doubling of cancellation fees is like awarding punishment to crops for the crime done by the buffaloes.

Increasing the ARP (Reservation period) to 120 days has given more opportunity to the touts who know the rush period and get booking of tickets in bogus names and then sell them to the needy at a premium. Members of the public in general usually do not know their exact travel dates in so much advance. When they are ready with their dates (after getting the leaves sanctioned or confirming the exam dates of the children etc.), they often find only waiting lists, as usual for peak season, and touts have already taken hold of the tickets, taking advantage of 120 days of ARP.

To discourage touts, the Government has taken some steps, yet scope remains to do something more. They can take following more steps viz.

  1. Touts generate a ticket in advance in bogus names and then they sell it to customers who travel with a fake identity. Getting a Fake identity is nowadays an easy task, which can be vouched from the websites. One such website is, which claims to create fake IDs.
  2. Aadhaar quoting in e-tickets be made compulsory and it should be the only eligible method for identification. But before implementing this, the Government have to ensure that every citizen does have Aadhaar.

Justification of Increasing public convenience:

Earlier, when cancellation charges were less, people used to buy additional tickets if they were not sure about their travel dates. In such cases, for the same journey, they used to buy tickets on more than one date and would cancel unutilised tickets. This reduced the probability of getting a confirmed ticket for other genuine buyers who were sure to travel. Now, if the cancellation charges are high, they will be discouraged to buy multiple tickets. Prima facie this seems to be a genuine justification. However, this is not a very strong justification due to following two reasons.

a. This methodology is not expected to increase revenue for Indian Railways, as many cancellations per person will be lesser. For example, Mr. X earlier used to buy two tickets and paid cancellation fees on one of them. This time, he will be purchasing only one ticket (after getting his plans duly finalised) which he will be utilising and thus, avoiding any cancellation charge unless some exigency is there.

b. This is also not expected to increase convenience to the passengers as expected. Even if a passenger used to purchase more tickets than actual requirement, ultimately, he used to cancel extra tickets, which were allotted to other passengers in waiting list. Thus, ultimately the berths were utilised. But, now, due to heavy cancellation charges, especially in sleeper class, some people may not bother to get the tickets cancelled when the refund amount is paltry. For example, if a ticket of sleeper class costs Rs 150 and cancellation charges are Rs 120, the passenger may not bother to get the ticket cancelled for a paltry amount of Rs 30. Thus, the chances of such berths remaining vacant due to “no-show” (no-show is a term used by airlines for the passengers whose confirmed seat remains vacant due to non-arrival of him/her), are high, but in the reservation chart, these will not appear vacant. Now, this berth will be given unethically by the TTE to some other person for a bribe and railways will not know that there was “no-show” because as per chart, the original passenger is travelling.

While if the passenger had got it cancelled against cancellation fee, Railways would have got some additional revenue (in the form of cancellation fee), and it would have been more convenient for public also, as another member of public would have got reservation against that cancellation at a genuine price instead of giving bribe to the TTE. Thus, it would have been a win-win situation for both the public and Railways. But, for this to happen, it is important that the passenger (who wishes to cancel his ticket), must get some considerable refund, which is possible only if cancellation charges for lower classes are reasonable. One way to ensure this could be to reduce cancellation charges to 50% (minimum Rs 60) of the ticket price, in cases where ticket price was less than Rs 180.

Conclusion: Increase in cancellation charges is justified in terms of making Railway profitable, viable and capable of providing more facilities to the public. It is also necessary to cope up with inflation. But Railways should keep three things in mind.

a. There should be revenue generation, which is important for existence.

b. The burden on the poor should be minimum. The poor should be subsidised by the revenues generated from the rich.

c. The policies should be such, as to discourage touts and also bribery by railway staff.

Finally, the public welcome the moves of Indian railways for revenue generation and railways must continue to differentiate between the rich and the poor, as far as fares and charges are concerned.

(The views and opinions expressed in the article are the author’s personal opinion and not of his employer company.)





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