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n six months rail fares may also move in sync with diesel prices.
The Railway Ministry, which will introduce the Fuel Adjustment Component on freight starting April 1, will take a call on extending the FAC to fares in September.
But this decision will be influenced by political considerations. Starting the last quarter this year, many States are set to get into elections leading to the general elections. With over two crore people using trains every day, passenger fares have been used as political tools and not revised for many years at times.
Dual price mechanism
Indian Railways decided to introduce the FAC on freight services from April 1, after oil companies introduced a dual price mechanism for diesel in late January, and brought in market-linked prices for bulk consumers such as Indian Railways.
“The FAC will be reviewed in six months. Railways will take a call on whether it should be spread over to passenger services at that time,” said Railway Board Chairman Vinay Mittal, while speaking at the national editor’s conference.
“In fiscal 2012-13, for Railways, diesel price has gone up by about 39 per cent and electricity price for Railways has gone up by about eight per cent,” said Vijaya Kanth, Financial Commissioner, Railway Board.
Kanth further explained, “In the Railway Budget, we did not introduce FAC on passenger fares because the passenger fares had been increased just two months ago, in January. Rather, we partially absorbed losses due to increase in fuel charges on passenger fares. In effect, we took a hit of Rs 800 crore hit on passenger services,” said Kanth.
Extra fuel bill
As a result of the dual pricing mechanism, diesel price for Railways went up by almost Rs 11 a litre. After January, there have been at least two rounds of almost Re 1 a litre hike each for bulk diesel prices, adding an extra fuel bill of Rs 560 crore.
As of now, Railway decided to review its FAC every six months. The FAC on freight is about 5.8 per cent taking into account the diesel hike till January, while on passengers it may be 2-3 per cent, said Kanth.
Meanwhile, in a move that may later have positive implications for Indian Railways, the diesel bulk pricing regime – where State road transportation undertakings end up paying significantly higher for diesel than private vehicle users – is the subject of court appeals in Tamil Nadu and Kerala.
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