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HindustanTimes Fri,19 Sep 2014
Mumbai train fare hike: Pure economics was a bad argument
Smruti Koppikar, Hindustan Times
June 25, 2014
First Published: 19:01 IST(25/6/2014)
Last Updated: 19:07 IST(25/6/2014)

When was the last time an elected government anywhere in the world, one with a massive mandate of the kind Prime Minister Narendra Modi enjoys, increased the price of any commodity or service by a monstrous 100%-180%--and got away with it? When the suburban railway fare was announced on June 20, doubling and in some cases trebling the current fares, it stunned the usually unfazed and unflappable Mumbaiites.

The acute anger among commuters and the wide-spread criticism levelled from all quarters, including the BJP and its ally Shiv Sena, was only to be expected. As was some sort of a rollback. The announcement of a rollback late on Tuesday evening may just have saved votes for the BJP-Sena alliance whose Maharashtra and Mumbai leaders believed their government in Delhi had scored a self-goal with the steepest-ever fare hike in the history of Mumbai's suburban railway system. Mumbaiites had begun severely mocking the "achche din" (good days) promised to them.

An important feature is that the steep hikes for first class travel on the suburban railway have also been rolled back. There would have been some grumbling there, about the unfairness of the hike and the lack of facilities that don't justify the sharp hike. It's true that commuting in the first class is no more luxurious than in the second class; the only difference, as the city legends go, is that the bags, shoes and after-shaves are recognisably branded ones. But the capacity of the majority of first class commuters to pay twice or thrice what they did till now is not really in question. That hike could have been left as it is.

The economics of the fare hike made sense: Suburban railway fares had not been increased for 10 years, they continued to be heavily subsidised, more than half of all rail passengers use the suburban railways in various cities and so on. The fare hike announced in last year's budget had to be rolled back. Subsequently, small increases were announced in June and October last year. The stage was set for a big increase. The June 20 decision was meant to offset major subsidies.

But all subsidies, across the world, have a political basis. A pure economic argument makes sense to those who do number-crunching and are fascinated by economic models, but in the real polity, economic decisions have to be - and have to look - acceptable. By any stretch of imagination, the 100 to 180% fare hike announced was not.  In doubling and trebling suburban fares, the Modi government decided as a financial consulting firm would, as indeed Pricewaterhouse Coopers (PwC) did in its report to the Mumbai Rail Vikas Corporation on suburban fares. Only 3-4% of Mumbai's railway commuters who earn less than Rs. 5,000 a month will be affected by fare hikes, it reportedly stated. With a 7.7 million daily commuter load, this still meant nearly four lakh people.

That's not all. It found a huge 64% of commuters earning below Rs20,000 a month and 18% earning nothing at all, presumably students and retired people, who depend on others. How this majority 82% of Mumbaiites could afford steep fare hikes is something the reputed PwC did not elaborate upon. In the discussions on the rollback, we can expect the usual homilies on subsidies. It will help to remember that subsidies are not doled out only to the poor and the working classes.

"The top 20% of households (in low-middle income countries) capture six times more in benefits from fuel subsidies than the poorest 20%," observed a report, not from the Communist Party of India (Marxist), but the International Monetary Fund (IMF) last June. In India, "in per capita terms, the top 10% of Indian households spend more than 20 times as much on fuel as the poorest 10%," it observed. Can fuel for SUVs be increased by 180% in one stroke without repercussions from the dwellers of Malabar Hill and Carter Road?

Now, let's wait for the railway budget.

(The views expressed are personal.)


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