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

BMC commissioner Chahal conferred with hon. doctorate

BMC commissioner and administrator Iqbal Singh Chahal has been conferred with a Honorary Doctor of Science Degree (honoris causa) by Guru Nanak Dev University in Amritsar, Punjab. Chahal was conferred the degree during the 48th convocation of the University in Amritsar at the hands of Punjab

Sebi to have two-track approach on ESG

Securities and Exchange Board of India (Sebi) aims to use a two-track approach on environmental social and corporate governance (ESG). Addressing a conference on ‘ESG for Atmanirbhar Bharat` in Mumbai, Sebi chairperson Madhabi Puri Buch said that that there should not be a single carbo

Accuracy more important than speed in news: Anurag Thakur

Presenting authentic information is the prime responsibility of media and that facts should be properly checked before they are put in the public domain, union minister of information and broadcasting Anurag Thakur has said. “While speed with which the information is transmitted is imp

FM concludes pre-budget consultations

Union minister for finance and corporate affairs Nirmala Sitharaman has concluded the pre-budget consultation meetings for Budget 2023-24 that were held from November 21 to 28 in the virtual mode. More than 110 invitees representing seven stakeholder groups participated in eight meetings sch

Coal production rises by 18% to 448 MT

The total coal production in the country stands at 448 million tonnes (MT) for the month of October 2022 which is 18% higher than the production of the corresponding period of last year. The growth of coal production from Coal India Ltd (CIL) is also more than 17%. The ministry of coal said

How to execute large-scale social impact projects

The number of social innovators and entrepreneurs has considerably increased recently in India. The idea of social entrepreneurship, which aspires to provide novel solutions for the world`s most critical social issues, is now receiving more attention. Challenges like overworked healthcare,

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