Fare hikes likely in Rail Budget

The Railway Budget to be presented on February 26 is likely to contain proposals for a hike in passenger fares and freight rates and a number of reforms measures in a bid to take the behemoth out of financial crisis.

Backed by recommendations of the Rakesh Mohan Committee, which went into the issue of restructuring the organisation, the Budget for 2002-03 is expected to initiate steps to end cross subsidisation of passenger fares and take up only commercially viable projects.

Several cost cutting measures including setting up of a 2000 MW project to nearly halve its electricity bill of Rs 40 billion per year are expected to be unveiled in the Budget to be presented by Railway Minister Nitish Kumar in Parliament next week.

Though Rakesh Mohan Committee's five-year time-table to phase out freight fare cross subsidy might not be fully adhered to, the Budget is expected to hike freight tariff on highly subsidised commodities like foodgrains, salt and fertilizers but slash it on steel and petro products to rationalise rates.

Official sources said while passenger fare hike might yield additional revenue of Rs 10 billion, the freight re-structuring could net Rs 2 to 2.50 billion.

With the balancing of freight fares, the Budget may peg the freight traffic for the next fiscal at 525 million tones as against 500 million tonnes in the current year.

The sources said eight to ten per cent hike in second class passenger fare was justifiable as they have not been hiked in the last three years. It is quite likely that the popular AC three tier fares will not be touched and more AC three tier coaches are expected to be added in most of the super fast trains.

The sources said the Budget is unlikely to touch the AC class fares as the already high rates have resulted in slower growth of this class of traffic which was increasingly shifting to air travel.

The Budget may contain some fare schemes to attract middle-class tourists besides introduction of more exclusive trains like the Palace on Wheels.

At present the freight earnings from salt, fertilisers and foodgrains are around 25 paise, 47 paise and 44 paise per tonne km as against the average cost of 65 paise per tonne km.

Simultaneously the freight charges on high value goods were much higher that its costs were driving away customers to road transport. Efforts would be there in the Budget to lower tariff on some of the high value goods to face the competition from road transport sector by making efforts to reduce cross subsidisation.

It is also expected that tariffs would be lowered on petro products moved by Railways in view of competition from pipelines.

The Mumbai suburban traffic, which accounted for half of the 13-million passenger traffic carried by Indian Railways might also be in for some shock as suburban fares might be increased marginally in the Budget.

The cross subsidy during 2000-01 in suburban and non-suburban passengers was about Rs 35 billion resulting in certain financial difficulties.

Because of shortfall in higher class passenger traffic and freight due to unreasonable pricing, the Railways may find its earnings decreasing by about Rs 7.50 billion in the current year.

In the face of Finance Ministry's reluctance to provide for any substantial increase in budgetary support, it is expected to be pegged at Rs 49 billion for the next fiscal.

Apparently market borrowing would be stepped up by the Indian Railway Finance Corporation to fund its annual plan of about Rs 100 billion.

Sources also said Railways have not been in a position to spend the money allocated under the budgetary support because of some difficulties in securing the matching contributions from Railways.

The gross budgetary support is in addition to Rs 10 billion provided in the Budget for railway safety fund. Railways have planned to take up Rs 17 billion of work including track renewal, improved signalling and other measures to improve the safety.

PTI

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