Milking freight to please passengers

Our Bureau New Delhi | Updated on February 25, 2011


How much does the Indian Railways' earnings from freight subsidise what it gets from transporting passengers?

One way to look at it is by comparing unit revenues from freight with that from passenger fares. During the current fiscal, the Railways' average income from hauling one tonne of goods over a one-km distance — what is technically called revenue per net tonne-km — is estimated at Rs 1.02.

Unit revenue

As against this, the Railways would be grossing less than 26 paise from moving an average passenger over one km. From the table, it can be seen that over the last 10 years, the unit revenue from freight has gone up by nearly 30 paise, whereas the corresponding revenue per passenger-km has risen by a mere 3 paise.

As a result, the passenger fare-to-freight ratio, which stood at 0.30:1 in 2001-02, is set to fall to 0.25:1 in the revised estimates for 2010-11. That is way below the corresponding average of 1.4:1 for Korea, 1.3:1 for France, 1.2:1 for China, 0.9:1 for Malaysia and Indonesia, and 0.7:1 for Thailand.

What it means is that whereas passenger fares in India are a fourth of freight charges, in other countries, commuters pay 1.2-1.4 times more than those transporting goods.

The extent of cross-subsidisation is even more, if one goes by the revelation in the ‘White Paper on Indian Railways' — tabled in December 2009 by the Rail Minister — that passenger trains utilise nearly 60 per cent of the Railways' network capacity.

While using up 60 per cent of the network, passenger revenues are, however, budgeted to contribute only Rs 30,456 crore or 28.7 per cent of the Railways' gross tariff receipts of Rs 1,06,239 crore during 2011-12, with the share of freight being Rs 68,620 crore.


Moreover, there is a large element of cross-subsidisation even within the passenger segment, with AC commuters being over-charged relative to second class travellers – to the extent of driving away premium rail traffic to airlines.

Thus, while the average revenue per passenger-km for 2011-12 is budgeted at about 28 paise, it ranges from as low as 14.75 paise for ordinary second class to Rs 1.05 for AC-3 Tier and Rs 2.53 for AC First Class.

Published on February 25, 2011

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