Last week, the Centre announced an ex-gratia sum of Rs 5 lakh for the kith and kin of the 37 people who died after a compartment of the Tamil Nadu Express caught fire on July 30. Announcement of an ex-gratia payment of Rs 5 lakh has become the norm for governments after every major rail accident — whether caused by collision, derailment or fire. Add to this another Rs 4 lakh that the bereaved are entitled to, provided they knock at the doors of the Railways Claim Tribunal. The maximum the dependents can get in the event of loss of life in a rail accident is Rs 9 lakh. If they are further lucky, the tribunal can order for an interest payment to account for the time between its accident and the actual disbursal of relief.


As against this, take the case of the bereaved in the May 2010 Mangalore air crash, who petitioned the Supreme Court for a compensation of Rs 75 lakh, an equivalent of the international norm of Rs 1 lakh SDRs. How can human life be so differently valued, depending on the mode of travel?

There ought to be a more just way of valuing loss of life and limb. The present norms, under the Railways Accidents and Untoward Incidents (Compensation) Amendment Rules, 1997, are unconvincing. For 34 categories of injuries, the compensation ranges from Rs 32,000 to Rs 3.6 lakh. How is a life valued at Rs 4 lakh under Railway rules, and not, say, Rs 3 lakh or Rs 40 lakh? Fortunately, the sum does not depend on the class of travel.

Perhaps, the best way to arrive at the right compensation is to provide for a minimum of, say, Rs 5 lakh, and thereafter take into account the age of the deceased.

Therefore, the death of a 25 year old should perhaps lead to a compensation of at least Rs 30 lakh to the dependents, taking into account the sheer fact of loss of life, and the loss of future earning capacity. (This issue comes up in motor accident insurance claims.) If an entire family has been killed in an accident, each member should get compensation.

Grevious injury, leading to loss of earning capacity in a young person, must be compensated to the extent of 80 per cent of the life cover. However, the death of a 70-year-old need not entail a payout beyond the minimum. To avoid implementation hassles and fraud, categories for compensation should be kept to the minimum, such as ‘elders’ and the rest in the case of death. For injuries, however, more categories would be necessary — but certainly not 34.

The amounts should be periodically revised to adjust for inflation, unlike in the present case where 1997 levels prevail. They should not be linked to the class of travel.


How can the Railways cope with such sums, one may well ask.

The answer lies in insurance. It is inexplicable that rail insurance has never been on the policy radar; this is despite the fact that the Railways carries 2 crore passengers daily, whereas the number of deaths and injuries in a day due to accidents is barely three (or under 900 in a year). A generous insurance cover can be generated out of a modest premium.

The Rail Budget 1993-94 announced the introduction of insurance, but nothing even remotely resembling insurance arrived on the scene till at least a decade later. The compensation to be paid by the Railways for death and disability was as per the meagre sums laid down in the Railway Accident and Untoward Incidents (Compensation) Rules, 1990. These levels were upgraded to the prevailing maximum of Rs 4 lakh compensation, laid down in the Railways Accidents and Untoward Incidents (Compensation) Amendment Rules, 1997.

In 2008, ICICI Lombard entered the picture, providing a cover of Rs 4 lakh on a premium of some five paise per ticket. Why cannot this Rs 4 lakh cover be raised under an insurance framework is hard to fathom. The arrangement did not continue, as the insurers wanted to double the premium, while the Railways was not agreeable. There was also the unresolved issue of how the corpus should be used. So, it was back to square one.

The Railways could have floated an insurance company, raising the life and disability cover by several times over the current levels. The current laws and rules can be replaced by an enabling legislation.


The premiums collected can be used for Railways’ safety and modernisation. The report of the Anil Kakodkar committee on rail safety, submitted to the Government in February, suggests that Rs 20,000 crore be raised each year for upgrading safety infrastructure. While it relies on the levy of a safety cess and contributions from the government to raise this sum, it has missed out on the insurance idea.

By charging a premium of just Re 1 from all classes of passengers, as well as platform ticket holders, it can raise about Rs 1,000 crore each year. It is hard to imagine an outgo of over Rs 135 crore under the proposed model, assuming an average payment of Rs 15 lakh for about 900 accident and casualty cases. This includes accident cases at unmanned level crossings, which account for over half the accident deaths in a year.

Why, then, has rail insurance never been taken seriously?

(This article was published on August 6, 2012)
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