Will Railways review subsidies on passenger fares?

Indian Railways is offering a 47% subsidy per ticket amounting to Rs 56,993 crore to keep train travel affordable. Now, the Parliamentary Standing Committee on Railways has recommended that the government-run carrier review losses due to social service obligation, including pricing fares below cost.

Passenger fares remained a sensitive issue, as railways remained an affordable means of transport for the masses. Passenger fare is supported by the rail freight sector.

The Standing Committee in its report submitted on December 13 observed that the Indian Railways should take into account larger social and national interests in formulating its policies and implement certain uneconomic operations in passenger services to provide affordable transport facilities to various sections of society.

“Indian Railways also operates some non-economic routes for strategic reasons. The losses incurred on this account come under social service liabilities. The net social service liabilities for the year 2022-23 stood at Rs 40,190 crore,” the committee noted.

The main components of social service liabilities are below-cost pricing, losses in parcels and luggage, postal and catering services, and losses in suburban services.

To reduce these losses, the Indian Railways must conduct a comprehensive review of these losses, the committee said.

“Additional losses in categories such as catering services must be eliminated on a priority basis. The committee urged the ministry to work to provide high-quality food at competitive prices and at the same time work to reduce social service obligations at the expense of catering services.

The committee also called for increasing the prices of AC buses to cover the losses.

Will the railways take the bold step? According to experts, passenger fares and subsidies provided by railways are a politically sensitive issue and all governments have approached the issue with caution.

During the Covid-19 lockdown, Indian Railways suspended passenger trains and increased the minimum ticket price from Rs 10 to Rs 30, in line with bullet train fares. The move aims to discourage overcrowding on passenger trains during the pandemic and the rising prices have continued over three years. However, in view of mounting pressure and grievances from passengers, public transport companies reduced the fare to Rs 10 in February 2024.

For AC services on trains like Shatabdi, Rajdhani and Duronto, Indian Railways introduced dynamic pricing in 2016 under which base fares will jump by 10% for every 10% of seats booked in these trains, with a maximum of 50% increase in the original fare. The aim and purpose of introducing dynamic fare trains is to provide railway users with convenience of travel at short notice by paying higher fares during specific periods when there is heavy rush.