The Hindu Business Line : Rlys plans indexing input costs to determine fare, freight rates

UNDER pressure from the Planning Commission for setting up a Rail Tariff Authority, the Railway Ministry has almost finalised a report that could do away with arbitrary fixing of railway fares and freights and avoid the `interference' of an independent regulatory body.

The basic thrust of the report would be on indexing input costs, based on which the Railways would be in a position to determine the final fare and freight rates, though the option will remain on whether to absorb the increase or pass it on to consumers. The report would soon be presented to the Planning Commission.

The Planning Commission has been pressing for an independent regulator in order to insulate the decisions on changes in fare and freight rates from "political considerations'' as had happened in the past.

With the adoption of this report, every time there is an increase in costs of inputs that go into rail transportation, a committee would meet to decide whether the impact could be absorbed or whether it should be passed on to its freight and/or passenger tariffs.

"Though we are not talking about increasing fares every time there is a rise in input costs, there would now be a process in place for ensuring deliberations every time there is a hike in input costs," a Railway Board official told Business Line.

"We had one round of discussion on the tentative report with the Planning Commission. We plan to submit the final report soon," he said. Based with consultations with Planning Commission, it was felt that it would be good to index various input costs to tariff.

For example, inputs like diesel, electricity and staff costs would be taken into consideration. Thus, every time, there is an increase in one of the input costs, a committee would meet and decide whether there is a need to increase the fares.

In the current fiscal, Railways witnessed a significant increase in working expenditure on account of fuel price increase. The two diesel price hikes this financial year have increased Railways' expenditure by about Rs 570 crore for the year. The Railways took an overall hit due to fuel price increase in diesel and electricity in the range of about Rs 600 crore for the year.