Upper class rail tickets, freight to cost more
New Delhi, Feb 24 : Caught between the general price rise in the economy and the deteriorating financial health of railways, Mamata Banerjee may do a tough balancing act in Rail Budget 2011-12 to be announced on February 25.
Government sources told FE that the national transporter would increase passenger fares in the upper class marginally and hike freight rates by up to 8% for a large section of commodities, barring foodgrains and oil that have high potential to fuel inflationary pressures in the economy.
Railways has not increased passenger fares for almost a decade while any hike in freight rates have been avoided in the past four rail budgets.
This has weakened its financial strength to such an extent that in 2010, the railways had to seek dividend waiver for five years. However, finance ministry did not agree to the demand and asked for a hike in passenger fares to fund rail operations.
Railways has also demanded a 260% increase in gross budgetary support to Rs 39,000 crore to tide over the crisis. There has been no addition to railway development fund and capital fund in the last two years.
Indian Railways had a development fund of Rs 432 crore and capital fund of Rs 3,114 crore at the beginning of the financial year. It is expected to withdraw Rs 2,853 crore from the capital fund in 2010-11, reducing the account balance to only Rs 262-crore.
The operating ratio of the entity is close to 100% now. There was a plan in 2009-10 to reduce the ratio, which denotes operational efficiency, from 95.3% then to 92.3% for 2010-11.
"There is no way that the railways could do without changing either passenger or freight rates this year," a senior official in the government said on the condition of anonymity.
However, the politically sensitive passenger segment is likely to be largely untouched in the face of elections in West Bengal, the home state of railway minister Mamata Banerjee. The state is scheduled to go for elections this May.
Sources said that as a solution, the budget could see freight rates being increased in a graded manner for iron ore, steel, coal and cement by up to 8%.
This is expected to have a significant impact on raising resources as these commodities comprise a bulk of items carried on rail.
Following a dynamic pricing policy, railways has already raised freight rates for commodities like iron ore more than twice this year. Some minor changes could be made in the fares of higher passenger classes such as AC two-tier and first class.
"Earlier, airlines had brought their fares very close to railways', taking away a portion of its traffic. There is space to hike ticket prices in higher class now as airlines recently increased fares substantially," another government official privy to the development said.
During April-January 2010-11, railways carried 756 million tonnes (MTs) freight, 63% of which came from coal, iron ore and steel. Foodgrains, fertilisers and oil together formed only 14% of the total tonnage, and are not attractive enough to railways in context of raising rates.
Meanwhile, railways is likely to fail in loading targeted 944 MTs of freight during the entire fiscal. At the current average of 75.6 MTs, it could reach a maximum of 907 MTs, way below the target. Last year, it had reached close to the targeted loading of 890 MTs.
Source: Financial Express
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