Rail Budget: Railways for dynamic fares but silent on timeline

NEW DELHI: Railway Board chairman Vinay Mittal backed up his minister on Wednesday by trying to explain the passenger fare hike in the context of the railways’ deteriorating finances. Mittal said the increase in fares was a “bold” move that had become necessary to balance the budget and strengthen the railways’ position. "If the hike and the projected passenger traffic grow by about 5.4%, the amount comes to Rs 6,500 to 7,000 crore," Mittal said.
Dinesh Trivedi has announced a plan for dynamic fare pricing by introducing a fuel adjustment component — which means, segregating fuel component in the cost associated with passenger service.
“…in the event of any further increase in input costs of railways, it will not be possible for us to keep the passengers cushioned from the impact of such increases,” Trivedi said in the Lok Sabha while elaborating that the fuel adjustment component would be dynamic and linked to the fuel cost. Analysts say this move may run into face stiff opposition from political parties as it is likely to impact the travel cost for the aam aadmi.
Mittal declined to give a timeline to implement the “contentious” proposal. Going by his statement though, the proposed hike and surge in passenger traffic would together help railways generate an additional Rs 6,500 crore-Rs 7,000 crore. At present, it is posting a loss of around Rs 21,000 crore on passenger traffic.
According to the rail board chief, the fare hike was a good beginning for the cash-strapped transporter as cross-subsidizing passenger fare with freight earnings was not a good idea. "No system can function without having adequate funds and as things work, we would not have been able to balance our budget had the minister not taken the very bold decision," Mittal said.
He said the target of bringing down the operating ratio to 84.9% in the next fiscal was achievable. The transporter aims to cut operating ratio, which is the money spent to earn every Rs 100, to 84.9% in 2012-13 from 95% in the current fiscal. “Railways has done it before. In 2004-05 the operating ratio was 91% which was brought down to 84% in 2005-06, 79% in 2006-07 and 76% in 2007-08,” Mittal said.
He said the railways pension liability has increased over the years and it stands at around Rs 18,500 crore now, while the staff cost is around 52% of its working expenses.
Mittal said there was no move to roll back the recent hike in freight rates. The railways is expecting to generate around Rs 18,900 crore if it meets the targeted growth in freight traffic. He said as freight has a dynamic tariff structure, "everything will depend on what the market expects".
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