Railways seek reimbursement for IRCTC service charge waiver

IRCTC used to charge Rs 40 per ticket for bookings in AC classes, Rs 20 per ticket in sleeper class

With the finance ministry starting the process for listing of Indian Railway Catering and Tourism Corporation (IRCTC), Indian Railway Finance Corporation (IRFC) and Ircon International (Ircon), the loss of service charge for IRCTC has become a cause for concern for railway officials.

The government waived the service charge following demonetisation to encourage cashless transactions.

The railway ministry has written to the finance ministry seeking reimbursement of the loss amounting to over Rs 500 crore (Rs 5 billion) on an annualised basis.

IRCTC shares half of this service charge revenue with the railways. Officials said the process for appointment of merchant bankers was under way with ICICI Securities and IDFC making presentations. The Department of Public Asset Management has set March 16 as the final date for submission of requests for quotations in this regard.

The decision to list these companies came as a surprise to the railways when Finance Minister Arun Jaitley made the announcement in his budget speech last month.

The railways had written to the finance ministry on the issue of service charge before the budget as well. When asked about the letters for reimbursement of service charge, BB Verma, the new railway financial commissioner, said, “We are expecting a good valuation for all three  companies. However, the waiver of service charge is a cause for concern as it may affect revenue of about Rs 500 crore (Rs 5 billion) for IRCTC annually.”

IRCTC used to charge Rs 40 per ticket for bookings in air-conditioned classes and Rs 20 per ticket in sleeper class. In 2015-16, railway ticketing generated Rs 551 crore (Rs 5.51 billion) in income for IRCTC, up 115 per cent from Rs 256 crore (Rs 2.56 billion) in 2014-15.

"We expect the finance ministry to do something about this and have written to them in this regard. On a monthly basis, the revenue for IRCTC from the service charge comes to an average of Rs 40 crore (Rs 400 million), of which about Rs 20 crore (TRs 200 million) is the share of the railways,” said Mohammed Jamshed, member (traffic) of the Railways.

The listing of railway PSUs will also mean that the railway ministry’s plan to set up a holding company for all public sector enterprises under its charge will be shelved. A draft Cabinet note with this proposal was earlier circulated among relevant ministries.

The plan included bringing 13 railway PSUs, including Bharat Wagon & Engineering Company, Container Corporation of India, Ircon, IRCTC, Konkan Railway Corporation, Mumbai Railway Vikas Corporation, Rail Vikas Nigam, Railtel Corporation of India, RITES, Dedicated Freight Corridor Corporation of India, Burn Standard Company and Braithwaite & Company and Kolkata Metro Rail Corporation, under one holding company.

Only Container Corporation of India is listed. “IRFC and Ircon have huge potential. The AAA rating that IRFC gets from credit rating agencies is proof of this. Listing will not affect its ability to raise money as the government will still provide sovereign guarantee,” Verma added.

In 2017-18, the Railways plan to raise about Rs 22,000 crore through IRFC bonds.

Photograph: Anindito Mukherjea/Reuters