Sep 27, 2016

Concessional travel & Low fares major reasons behind Railways’ losses: NITI Aayog

niti aayog aravind panagaria
New Delhi: Pointing out that Indian Railways, the nation’s largest transporter, suffers losses every year owing to its orientation towards social service — i.e. charging low fares which are way below its costs, and granting a range of concessions to passengers belonging to 53 categories like senior citizens, war widows, patients suffering from life threatening diseases, and physically challenged-persons among others — the NITI Aayog, while glossing over the life-long free travel to which MPs (both sitting as well as former) are entitled in trains, has suggested that Indian Railways should take steps to address the social cost of its passenger service business.
In other words, the railway ministry has been advised to revisit the concessional travel it offers to such a long list of category of passengers, as the NITI Aayog feels that it is the social cost obligation which has majorly impacted its earnings over the years, even though it has failed to mention free travel by MPs in the category of concessional travellers.

While NITI Aayog in its paper titled “Reviewing the Impact of Social Service Obligations by Indian Railways”, has made this suggestion and has even listed various categories under which passengers are given concessional travel, it has failed to list MPs who are entitled to free travel in AC 1 as well as AC II compartments for whole life. This major concession is not only for sitting MPs but even for ex-MPs.

Incidentally, when this correspondent checked the Indian Railways list of categories of passengers who are entitled to concessional travel, it does not mention Members of Parliament anywhere. Free travel by legislators in the public transporter might as well be adding to its burgeoning losses.

The Indian Railways’ list consists of 53 categories of passengers under 12 major bands. These are disabled passengers, patients, senior citizens, awardees, war widows, students, youth, farmers, artistes and sports persons, others (including those attending conferences, camps, tours etc), medical professionals, and Izzat pass holders (those under low income groups and working in unorganised sectors).

Meanwhile, identifying concessional travel as well as low fares as the two major reasons behind Indian Railways’ losses, NITI Aayog has said that the transporter suffered a total loss of Rs 35,928 crore in 2014-15 in its passenger business, and therefore, looking at this matter in a holistic manner, it is suggested that measures to address social costs of passenger service business.

The paper, which is authored by NITI Aayog member Bibek Debroy and Niti Aayog OSD Kishore Desai, said that several railway ministers have expressed their concern that the “social service” orientation of the passenger transport business impacts Indian Railways’ flexibility to operate this business on commercial principles.

It also pointed out at an interest aspect that while Indian Railways’ passenger business incurred a net loss of about Rs 33,000 crore in 2014-15, its goods business made a profit of about Rs 44,500 crore during the same period.

This, it said, happens because Indian Railways ends up treating its goods business as a tool to more than make up for its passenger business losses to manage overall financial situation.

“This practice of “overcharging” goods customers is actually unhealthy for the net economy as higher goods tariffs are eventually passed on to common public in the form of higher electricity cost, higher cement, steel costs etc. This unfair practice also distorts the inter-modal share leading to customers preferring sub-optimal choice of modes such as roads,” it noted.

Therefore it should take steps to rationalise goods tariff distortions, the NITI Aayog suggested in the paper.