Indian Railways: Balancing Socialist Economy & Revenue Generation

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Indian railways: balancing socialist economy & revenue generation
Indian railways: balancing socialist economy & revenue generation

Last week, I planned a weekend trip to Agra along with my family. Since we had relocated to Gurugram, we had not been able to go out even once to explore the city or area around it. So, a trip to Agra, being just a couple of hours away from Gurugram, seemed like a very good proposition. Immediately, I opened my laptop to book railway tickets for Agra. But alas!! All the trains were full. The waiting list in every other train was well above the 200 figure mark. I had no choice but to wait until the day before my journey day to try the ‘Tatkal’ route. But, there was greater disappointment for me in store on that day. The Railways’ site for online ticket booking itself didn’t open on time and by the time it did, the ‘Tatkal’ quota had also been booked. Grudgingly, I was left with no option but to cancel the trip.

This incident made me curse the Indian Railways no end. Why do they allow the booking of tickets four months in advance? So that they can get ‘free’ float funds in hundreds of crores? They themselves must be earning a handsome amount of interest on these funds without having to pay any interest to the passengers. Even though the capacity of an unreserved coach is 90 passengers, tickets are often issued to double that number of passengers. That is why the unreserved coaches are always jam-packed with passengers. I thought that the Indian Railways must be earning a handsome profit by adopting such tactics and out of curiosity, I googled the income statistics of Indian Railways.

Now, grudge made way for a surprise. And surprised indeed I was because I came to know that the passenger segment of the Indian Railways is highly subsidized and loss-making, contrary to what I was thinking.

The first passenger train in our country, carrying 400 passengers in 14 coaches, ran for 34 km between Bori Bunder (Mumbai) and Thane on April 16, 1853. Initially, the coaches didn’t have even toilets which were introduced only after the national carrier completed 50 years! Lighting in passenger coaches was introduced in 1897. Later on, other facilities like fans and sleeping accommodation were also introduced. In 1956, the first fully air-conditioned train was introduced between Delhi and Howrah. In 1986, computerized ticketing and reservation were introduced in New Delhi. The first Shatabdi Express was introduced between New Delhi and Jhansi in 1988.

Today, the Indian Railways (IR) is the largest rail network in Asia and the second largest in the world. It transports about 2.5 crore passengers (almost equal to the population of Australia) daily. Even with such a volume of passenger traffic, the Railways makes losses from the passenger segment. The Indian Railways is the national carrier for the country’s masses. It is the preferred mode of transport for the poorest of the poor. As such, it has obligations towards society as well apart from earning revenue. Traditionally, the fares have not been increased much due to this and other political reasons. The fares were last revised in 2014.

The losses from the passenger segment of Railways are compensated by profits from the freight segment and almost 95% of the profit from the freight segment goes towards cross-subsidisation of the passenger segment. This results in the deterioration of the financial performance as a whole of the national carrier. As per the data released by the Railway Ministry, the operating ratio for the freight segment in FY 2017-18 was 58.83% which means on every Rs 100 of revenue, the freight segment was making a handsome profit of Rs 41.17. But surprisingly, the overall operating ratio for the Railways as a whole was at a  level of 98.44%-the worst in the last 10 years. This was because the operating ratio for the passenger segment was at a dismal level of 181.20% which means that to generate every Rs 100 of revenue from the passenger segment, the carrier was spending Rs 181.20!

Although no drastic measures have been ever taken by the Govt. regarding the increase in fares due to the reasons enumerated above, yet, the Govt. has taken a slew of measures from time to time towards improving the financial health of the national carrier. Some of these measures are:

1.‘Give up’ Scheme: It was started in 2017 to encourage senior citizens to give up their train fare concessions in a bid to increase revenue. As per CAG audit report, during the FY 2017-18, Rs 1411.23 crores worth of concession in fare was given to 5.92 crore senior citizens. The CAG report also stated that while the national carrier earned Rs 88064 crores as revenue from 2015-16 to 2017-18 from the sale of reserved tickets, it also allowed concession of Rs 7418 crores on these reserved tickets during the same period. Also, 89.7% of the revenue foregone towards concessions is on account of concession to senior citizens and privilege pass/PTO holders.

2.Dynamic Fare Pricing/Flexi fares: The Railways had introduced dynamic pricing of tickets in September 2016 for 142 of its premium trains-44 Rajdhani, 46 Shatabdi and 52 Duronto trains. Under this rule, the price of the ticket goes up as bookings grow. The fare would go up by 10% for every lot of 10% tickets booked. However, the scheme has been scrapped in most of the trains as it led to the loss of traffic volume for the national carrier.

3.Modernisation: One of the main reasons for the failure of a Flexi fare scheme was the competition to the Railways from low-cost airlines. Flexi-fare scheme reduced the gap between rail and airline tickets. Also, the quality of services and journey-time factor favoured the airlines. Now, the railways has also started modernizing its fleet by taking various measures some of which are as follows:

a)Introduction of LHB (Linke-Hofmann-Busch,Germany) Coaches: Traditionally, the Railways has been using ICF (Integral Coach Factory, Chennai) coaches. These coaches are considered having inadequate safety measures and are being slowly phased out. These are being replaced with LHB coaches which were introduced in mid-90s. These coaches are lighter, safer and capable of speeds upto 160 kmph.

b)Route Electrification: The national carrier has electrified about 46% of its running track as on March 31, 2019. As per the Railway Ministry, the entire track length in the country would be electrified by 2022.

c)Track modernization: Various initiatives have been undertaken by the Indian Railways for modernization of tracks as well. Nowadays, Pre-Stressed Concrete (PSC) sleepers are being increasingly used in place of wooden sleepers as these are economically and functionally best suited for high-speed and heavy density traffic. Long rail panels or welded rails are being used in place of rails with fish plated joints. Rails now being used are having high tensile strength. Bridges are being strengthened/rebuilt.

Signalling system for the trains is also undergoing continuous revamping. Automatic Train Protection (ATP) system based on the proven European Train Control System (ETCS) is being implemented on the tracks. The system will help in the seamless transmission of information between tracks and the engine cabin electronically. It will help in keeping train speed within the permissible limit.

d)Upgradation of Railway Platforms: The facilities and services at railway platforms are being upgraded to offer a convenient, hassle-free and pleasant travelling experience to the passengers. Escalators have been installed at select stations like New Delhi, to begin with. Free Wi-Fi facility is being offered to passengers. Use of false ceiling is being done to enhance the aesthetic appeal of the platforms.

e)Introduction of High-tech trains: To compete with the travel experience provided by low-cost airlines, the national carrier has introduced some modern, high-tech trains like:

i)Vande Bharat Express: It is also known as Train 18. It is a semi high-speed, air-conditioned day time journey train with modern facilities like Wi-Fi, snacks tables, CCTV cameras, hydraulic pressure doors as well as fire and smoke detection and extinguishing system. The train can run at a top speed of 200 kmph.

ii)Tejas Express: It is a semi high-speed, air-conditioned train which was introduced in 2017. The coaches in this train have LED TV on each passenger seat with a phone jack, local cuisine, Wi-Fi, tea and coffee vending machines, CCTV cameras, smoke and fire detection and extinguishing system, bio-vacuum toilets, tap sensors, hand dryers and integrated Braille displays. It can also run at a top speed of 200 kmph.

iii) Gatimaan Express: It is a semi high-speed, air-conditioned train running between Delhi and Jhansi at a top speed of 160 kmph.

iv) Humsafar Express: It is an air-conditioned train with 3-tier coaches and had its inaugural run between Gorakhpur and Anand Vihar terminal. It is equipped with LED screens displaying information about stations and train speed, a PA system, tea and coffee vending machines, charging ports for electronic devices, bio-toilets, CCTV cameras, smoke alarms and heating and refrigeration facilities for food.

v)Bullet Train: The first high-speed rail link in the country has been proposed between Mumbai and Ahmedabad. The work on the project is expected to begin in April 2020 and completed by Dec 2023. The trains on this line will run at speeds ranging from 320 to 350 kmph.

4.Dedicated Freight Corridor: The Railways has one of the lowest passenger fares and highest freight fares in the world. The freight segment faces stiff competition from the road transport segment. The passenger and freight trains run on the same network of rail tracks. Many times, freight trains have to be stopped midway to allow smooth passage of passenger traffic. There is thus an urgent need to provide a dedicated freight corridor for freight trains so that their service can be made world-class. It will help the national carrier to compete better against the road transport sector.

5.Revision of Child fare rule: The Railways has also revised its child fare rule since 2016. Now, children of age 5 years and under 12 years of age are charged full ticket in reserved coaches instead of half ticket if a berth is sought for them. However, if the berth is not sought for the child, then half of the full adult fare will continue to be charged as hitherto.

In view of the above, it can be said that the Indian Railways has chalked out an ambitious plan to bring the finances of the national carrier in the pink of health. Much will now depend on how the various measures are put to execution within the timelines envisaged.

After going through all the above facts,  the surprise, that I felt on discovering that the passenger segment of the railways is a loss-making segment, now gave way to concern and I could only say ‘All the Best’ to the national carrier.

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