From January 1, train passengers have been paying more for the travel. Although there is no increase in suburban fare and season tickets, the increase in fare will be applicable to some trains, including Rajdhani Express and Garib Rath.
While several expert committees have suggested rationalising passenger fares, the latest hike in fares was mostly based on the recommendation of committee for mobilisation of resources for major railway projects and restructuring of railway ministry and railway board, that was headed by Bibek Debroy who a NITI Aayog member. Though the panel submitted its report in 2015, the burden of 7th Pay Commission on Indian railway has necessitated rationalisation of fares now. Last fare hike had happened in 2014.
Commenting on the financial issues, Debroy panel stated that financing of railways is a challenge because of several reasons. The unbalanced mix of passenger and freight traffic does not help generate revenue, and the investment made in projects that do not have traffic does not help in revenue generation either.
The panel also stated that efficiency improvements do not result in increasing revenue, and delays in projects result in cost escalation, which makes it difficult to recover costs. "Railways has also been mostly financed through internal resources and budgetary support, and not through external resources. Thus, there has been no financial oversight of its projects, " Debroy panel noted.
The panel also pointed out that one of the key reasons for the failure of private participation in railways is that policy making, regulatory function and operations are vested within the same organisation, that is the ministry of railways.
It pointed out that one of the key reasons for the failure of private participation in railways is that policy making, regulatory function and operations are all vested within the same organisation, that is, the railway ministry.
"Railways’ monopoly discourages private sector entry into the market. Secondly, schemes for private sector participation are not prepared with the involvement of stakeholders. Thirdly, the schemes are designed in such a way that the risk lies mostly with the private parties" panel further stated.
New fares will be applicable in special trains like Rajdhani Express, Shatabdi Express, Duronto, Vande Bharat, Humsafar Express, Mahamana, Antyodaya Express, Garib Rath, Rajya Rani, Jan Shatabdi Suvidha and Yuva. According to railways, the increase is by 1 paisa per km for ordinary non-AC trains, 2 paise per km for mail and express trains (non-AC coach), and 4 paise per km for travel in AC classes.
The railways did not specify the revenue that will be generated due to this hike. The ministry has simply stated, "In order to expand passenger amenities and facilities at railway stations and in trains, it has become imperative to increase the train fare marginally without over burdening any class of passengers. Fast modernisation of Indian railway will be achieved through this fare revision".
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The railways has set a deadline for completing all its pending projects as 2022, the 75th year of Independence. It plans to modernise 400 railway stations. The model of the redevelopment of railway stations has been drawn from the example of privatisation of six airports in the country. The railways is also planning to offer WiFi at all stations, and install CCTV cameras at all stations for surveillance and security.
In order to create a level playing field for private players in the sector, the Debory panel recommended setting up an independent regulator known as the railways regulatory authority.
It stated that the regulator will be a statutory body, with a separate budget and independent of the ministry. Though it is still unclear if it will determine tariff, the regulator will monitor whether the tariff is market determined and competitive. "An independent regulator for railways is also necessary because of the technical and specialised nature of the sector," the panel added.
Debroy panel also mentioned restructuring of railway zones. Indian railways has 17 zones, which are further divided into 68 divisions. "The present zones have developed historically and not from a specific strategy. Hence, there is a need to restructure the organisation’s zones and divisions."
On the accounting reforms, the committee stated that the current accounting system does not provide details of the cost of various activities and services, such as introduction of new trains and scheduling of stops. "It neither tracks assets nor assesses liabilities. Consequently, it becomes difficult to compute the costs and benefits of any project or activity," the panel added. Hence, the committee recommended switching to a commercial accrual-based double entry accounting system. It claimed that this will clearly distinguish between revenue and capital expenditures and present a complete picture of debt and other liabilities. Additionally, it will help determine how much it costs to run a train and whether it is viable to run it, committee said.
