The government’s decision to introduce a dynamic pricing system on some of the Indian Railways’ premium trains does have a strong case on the need to raise passenger fares.
The Indian Railways carry 23 million people every day but successive governments have backed away from reforms and especially hiking passenger fares, which is a politically sensitive topic. As a result, the country’s largest employer runs many trains at rock-bottom fares and struggles to balance its books.
Amongst major countries that have rail operations, the Indian Railways are placed at the bottom of the heap in terms of revenues earned from freight and passenger traffic.
A 2012 World Bank study based on purchasing power parity (PPP) calculations brings out the grim situation: The Indian Railways earn 1 cent from each passenger per kilometre as against 9.4 cents earned by the Japan railways, 6.7 cents by the Russian railways, 6.2 cents by the Deutsche Bahn (German railways) and 2.7 cents by the Chinese railways.
In terms of nominal price, the gap in earnings is larger. Calculated on such terms, the Indian Railways earn 0.6 cents from each passenger as against 19 cents earned by the Japan railways, 12.6 cents by the Deutsche Bahn, 5.2 cents earned by the Russian railways and 2.4 cents by the Chinese railways.
“Calculations based on the PPP index are more accurate, as these take into account various economic parameters including comparative currency values and service costs,” officials said.
Trends in respect of freight earnings are also at a sharp variance. According to PPP calculations, the Indian Railways earns 1 cent from the transportation of goods for every kilometre as against 0.75 cents earned by the Russian railways, 0.58 cents by the Chinese railways and 0.51 cents by the US railways, official documents show.
In terms of nominal prices, other countries have done better. The US earned 2.28 cents from the transportation of every kilometre of freight according to such calculations, while the Indian Railways earned 2.11 cents against 2.20 cents earned by the Russian railways and 1.49 cents by the Chinese railways.
While freight earnings of the Indian Railways have been healthy, the transporter’s overall finances have not improved -- largely because earnings from goods transportation have been used over past decades to cross-subsidize passenger services.
The 2015 White Paper of the Indian Railways brings out the magnitude of the “freight versus passenger” distortions.
In 2012-13, the Indian Railways spent 57.76 paise and earned only 28.52 paise to carry one passenger on its network of 65,000 kilometres. Against this, the transporter spent 75.28 paise and earned 123.27 paise from the transportation of each kilometre of freight.