The Hindu Business Line : Railways’ ‘haulage’ charges eat into IRCTC profits

New Delhi, March 1 Indian Railways is eating into the profits of its catering subsidiary IRCTC. The Ministry has decided to limit the gross profit of Indian Railway Catering and Tourism Corporation (IRCTC).

Capping IRCTC’s gross profits at Rs 30 crore in 2006-07, the Ministry directed IRCTC to pay the excess (over and above the threshold) as haulage charges to Indian Railways. However, the decision (taken in 2007) was kept under wraps.

Railways’ logic is that since on-board train catering operations are being transferred to IRCTC, the public enterprise has to bear the cost of hauling the pantry car. A Ministry official said, “The total haulage charges on IRCTC are working out to be very high (at Rs 250-300 crore). IRCTC, with Rs 434-crore topline, would have collapsed if we were to extract the entire amount. Thus, we decided to limit the profit.”

However, IRCTC has been handling train catering operations from even before 2006-07 and Railways was not imposing any haulage charges then. “Railways has to decide whether it should recover the cost of providing onboard catering services to passengers entirely from the food sales, or partially from the ticket sales – which it has been traditionally doing,” argued officials disagreeing with the decision.

“Today, Railways says it is losing out on passenger revenues that it could have earned by fitting berths in the pantry car. Would IR extend the same logic to the toilet facilities in the trains as well and charge passengers for using toilets,” asked a source.

In 2006-07, IRCTC reported profit after tax of Rs 20.22 crore and paid Indian Railways a haulage charge of Rs 30.21 crore. “Net profit could not be increased…(because) the Railway Board capped the gross profit of the company,” IRCTC said in its annual report.

Whether the Ministry would cap the IRCTC profits this fiscal as well, and if so at what level, remains to be seen. Incidentally, a Ministry official had an interesting logic, “If we do not impose haulage charges, IRCTC would have registered higher profits and paid higher taxes. But, Railways earnings would not have gone up.”

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