Railway practice to “overcharge” goods customers unhealthy: Niti Aayog

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, said a report

GN Bureau | September 15, 2016


#Surge Pricing   #Rail Budget   #Suresh Prabhu   #Indian Railways   #Railways   #Niti Aayog  


Niti Aayog, in its report Impact of 'Social Service Obligations' by Indian Railways, said that inefficiency in railways cost structure significantly contributes to the losses in passenger service business and hence tariff increase cannot be the only mechanism to address such social costs. It has to be necessarily complemented by cost optimization and non-fare box revenue enhancement strategies with varying levels for various classes.


Railways estimate indicate that financial impact of under recoveries due to lower tariff in non-suburban services is expected to be around Rs 28,000 crore, while a review indicates that this could more reasonably be around Rs 22,000 crore considering the competitive market dynamics in estimation.


The report, released on Wednesday, said that for AC classes, the average tariff levels are higher than equivalent fares for AC bus service. Hence, it is likely that losses in AC class are attributable to higher base cost structure of railways than to its fare structure. Railways would accordingly need to explore alternate cost optimization and expenditure control strategies to recover such losses.


For the year 2014-15, while railways passenger business incurred a net loss of about Rs 33,000 crores, its goods business made a profit of about Rs 44,500 crore.


“Effectively, IR (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. Therefore, looking at this matter in a holistic manner, it is suggested that measures to address social costs of passenger service business should necessarily be taken along with measures to rationalize goods tariff distortions.”


The report goes on to say that it can also be argued that Railway provides better services comparable to bus transportation for various classes. For example, AC and Sleeperclass in railways is generally considered better compared to the equivalent class in bus transport. For second class, train services are more or less comparable and possibly better for many cases than bus transport. Hence, in an ideal competitive environment, railways should be able to charge a commensurate premium in its tariffs reflecting service level differences.


Read the full report here

 

Comments

 

Other News

India’s forest cover increases by 5,516 sq km in four years

The Dehradun-based Forest Survey of India (FSI), an organization under the Ministry of Environment, Forests and Climate Change, carries out the assessment of forest cover biennially since 1987 and the findings are published in the India State of Forest Report (ISFR). As per the latest ISFR 2021, there is a

Steps taken to meet higher power demand of April-May

While the average growth of energy requirement in the country for 2023-24 viz-a-viz 2022-23 has been estimated as 4.9%, the months of April and May have been projected as high demand period. During the current year, the peak demand is expected to be around 229 GW during the summer period. The government ha

Millets to make comeback in army ration after half a century

As the UN has declared 2023 as the International Year of Millets, the Indian Army has steered introduction of millets flour in the rations of soldiers. This landmark decision will ensure troops are supplied with native and traditional grains after over half a century, when these were discontinued in favour

Central Bank Digital Currency has game-changing potential

When discussing digital currency, you might think of one or two well-known varieties. There is the digital representation of currency that you access with mobile and online banking services. This currency is the liability of a commercial bank. There is also cryptocurrency, a digital medium of exchange issu

An Insider’s Account of the Zail Singh Years: The Endgame

The Indian President: An Insider’s Account of the Zail Singh Years By K.C. Singh HarperCollins, 312 pages, Rs.699  

‘My Father Was a Simple Man’: Remembering Gen. Rawat

Bipin: The Man Behind the Uniform By Rachna Bisht Rawat Penguin, 207 pages, Rs 599 On the morning of 8 December 202

Visionary Talk: Amitabh Gupta, Pune Police Commissioner with Kailashnath Adhikari, MD, Governance Now


Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter