Freightonomics to derail Indian Railways’ finances
In his budget, rail minister Suresh Prabhu has promised to address the concerns of all stakeholders – passengers, employees and industry. By leaving fares intact, he has given passengers cause for cheer. But the same cannot be said about freight.union budget Updated: Feb 26, 2016 11:56 IST
In his budget, rail minister Suresh Prabhu has promised to address the concerns of all stakeholders – passengers, employees and industry. By leaving fares intact, he has given passengers cause for cheer. But the same cannot be said about freight.
Against the budgeted 10% increase in freight earnings, reality stops at 5.5%. Volume growth is even more dismal — 1%, against a targeted 8%.
Freight accounts for 66% of railways’ revenue, and these numbers do not bode well for India’s largest public sector undertaking, or for the economy. The railways’ share in the national freight basket is sinking, and causing a loss to the exchequer of 4.3% of the GDP, according to a National Transport Development Committee report.
For the past few years, a slowing economy and high freight have rendered the railways uncompetitive. By hiking freight by 4% in the last one year, the ministry has not helped.
Indian Railways follow a policy of cross-subsidisation of low passenger fares with high freight rates. In fact, the budget showed a loss of Rs 30,000 crore due to subsidising of passenger fare in 2015-16. Passenger fares in India are among the lowest globally, while freight is abnormally high. For example, rail freight costs 10% more than the road equivalent for a 1,500-km journey.
“Freight has to be brought back to railways by increasing capacity and reducing rates” said Raghu Dayal, former CMD of Container Corp of India Led (Concor).
“The policy should be a combination of service and pricing to keep railways competitive” said Manish Agarwal, leader, infrastructure at PwC.
Industry stakeholders are optimistic. “Suresh Prabhu is a known reformist and he will introduce policies to turn around the freight business of Indian Railways,” Titagarh Wagons said.