As expected, Railway Minister DV Sadananda Gowda did not announce any fare hike in the Rail Budget. But, you will get a dose of the bitter pill later this year, as the Railways plans to continue passing on fuel price hikes to end-users.

“We will continue with the Fuel Adjustment Component, which was there in 2013-14. There will be a periodic hike once in six months,” Gowda said while addressing the post-Budget press conference.

The recent hike in passenger fares by 14.2 per cent consisted of a 10 per cent hike in basic fare and 4.2 per cent fuel adjustment component. The 6.5 per cent hike in freight had a 5 per cent increase in the basic freight rate and 1.5 per cent fuel adjustment.

The fuel price imperative

Last October, passenger fares and freight rates were hiked by 2 per cent on account of the fuel price hike. Fuel accounts for almost one third of the total operational cost of the Railways and diesel is the key fuel. Even airlines are allowed to levy a fuel surcharge over the basic fare and revise it when there is a change in the price of jet fuel.

In a bid to mobilise funds, Gowda said more private players would be roped in and foreign investments allowed.

Commenting on the PPP policy, he said: “Private players have no faith. They feel if you invest in Railways there will be no returns. We will have to change certain policies to attract private players.”

On FDI, Gowda said that the Commerce Ministry had been requested to delete the provision prohibiting foreign capital in railways. “We need huge investments to run bullet trains,” he said, adding that FDI would not be allowed in core operational areas.

Gowda also said a proposal has been made for a a scheme to bring in the investible surplus funds of Railway PSUs in various projects, including ₹4,000 crore from IRCON.

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