2013-14 would mark the first year when the cross-subsidisation of passenger traffic by goods hauled by the Indian Railways will actually see a reduction.
One way to gauge the extent of cross-subsidisation is to compare unit revenues from freight to that from passenger fares.
In 2011-12, for instance, the Railways’ average income from transporting one tonne of goods over a one-km distance – what is called revenue per net tonne-km – stood at Rs 1.04. As against that, it grossed hardly 27 paise from moving an average passenger for every km, translating into a fare-to-freight ratio of 25.9 per cent.
The accompanying table shows that there is not a single year since 2003-04, when unit freight realisations have not risen. In contrast, the revenue per passenger-km was almost static, as a result of which the Railways’ average fare-to-freight ratio fell from nearly 34 per cent to under 26 per cent between 2003-04 and 2011-12.
Former Rail Minister Dinesh Trivedi’s recourse to a sharp pre-Budget freight hike last year – ranging from a fifth in pig iron and coal to over a quarter for cement – led to a further worsening of this ratio to an estimated 21.8 per cent for 2012-13.
But that is likely to change with last month’s sharp hike in passenger fares – covering even ordinary and sleeper class commuters for the first time since 2002-03 – effected by the current Minister, Pawan Kumar Bansal, again as a pre-Budget initiative.
For 2013-14, the budgeted unit revenues from passenger traffic are slated to go up by over 6.6 paise, which is more than the corresponding 5.5 paise increase for freight. As a result, the average fare-to-freight ratio would, for the first time, go up to 25.8 per cent.
But that amounts to passenger fares in India still being only slightly over a fourth of freight charges, unlike in other countries – including China, Korea and France – where commuters pay 1.2-1.4 times more than those who move cargo by Rail. So, while the cross-subsidisation has come down, it remains far too high by global standards and from the perspective of the Railways’ financial health.
In his Rail Budget speech, Bansal noted that the number of passenger trains have increased from 8,897 in 2001-12 to 12,335 in 2011-12.
But the Railways’ losses on these operations have mounted from Rs 4,955 crore to Rs 22,500 crore during this period, while estimated at Rs 24,600 crore in the current fiscal.