Right signals on rail tariff but…

MAMUNI DAS | Updated on March 09, 2018 Published on October 12, 2012

The hike in non-AC fares can be backed by the requisite information and inputs. — R. Eswarraj

The Railways tariff regulator is expected to ensure that fares are adjusted as a matter of routine, without political interference. But achieving such autonomy is a tall order.

On the railway passenger fares, does the Government now want to hear from a regulator, what it has already heard from many expert committees? More than a tariff regulator, the Indian Railways needs the political strength of the ruling party to amend its fare structure at the earliest.

Having got the Railway Ministry portfolio, the same Congress Party — which tried its best to convince its ally Trinamool Congress’ Mamata Banerjee to increase fares just six months ago — has now lost the courage to immediately bring into effect the proposed fare hike for the non-AC class. In April, close to 95 per cent of the Railway passengers escaped the fare hike proposed by the then Railway Minister Dinesh Trivedi, and rolled back subsequently by Trinamool Congress Chief Mamata Banerjee.

Dinesh Trivedi’s Budget proposals were openly supported by Prime Minister Manmohan Singh. In fact, the Prime Minister even expressed his regret when Mamata Banerjee replaced Trivedi with Mukul Roy as the Railway Minister, who rolled back the passenger fare hike. Moreover, in the eight-year run of the UPA regime since 2004, the Congress Party has goaded all the Railway Ministers, from its allies, including Lalu Prasad, to effect a fare increase for the non-air conditioned class. Now, it is strange to see the same ruling party shying away from touching some two crore railway passengers who travel in trains everyday.

All Railway Ministers find different ways to duck the question on fare hike, and Congress’ C. P. Joshi was no different. When asked about when a fare increase would be effective, Joshi said he would like the regulator to decide. But he also refused to comment on whether this meant no fare hikes till a regulator was set up.

Meanwhile, there is no dearth of knowledge on why, and by how much, the rail passenger fares could be increased. Earlier this year, the Safety Committee headed by eminent experts, including Anil Kakodkar and E. Sreedharan, had recommended the extent of fare increase in their detailed report, which was a result of many months of study.


A fare hike through a cess — ranging from Rs 3 to Rs 50 per passenger — could help the Railways raise Rs 5,000 crore for safety works every year, the committee had said. The cess was higher for higher segment passengers — Rs 3-10 for non air-conditioned (AC) travellers and Rs 20-50 for AC passengers.

Even the Modernisation Committee set up under Sam Pitroda suggested levying a surcharge on tickets.

Second, Trivedi’s Budget had proposed a fuel adjustment component, so that train fares could be linked to fuel increases. A few years ago, the Railways had commissioned a study to derive an index-linked fare fixation mechanism based on different input costs. This formula could be vetted by an inter-ministerial group, or even a so-called regulator, as and when it is formed.

After all, in the highways sector — incidentally another portfolio held by C. P. Joshi — the Congress Party followed the same institutional mechanism to set the toll charges and even allowed for inflation-linked automatic increases every year. That mechanism has its own flaws, but the point here is about the availability of knowledge and institutional mechanism.

With all this information already available, what is the incremental knowhow that a rail tariff regulator will bring in now?

For all practical purposes, in the Indian context, the rail tariff regulator is being created more to insulate the inflation-defying rail tariffs from political interference. But there is no guarantee it will happen. Because, politicians can’t wash their hands of such a decision even if a regulator is put in place.

Global signals

Passenger rail tariffs are a political affair, globally, including in markets where railway services have been privatised. In the UK, which has an unbundled railways — with the railway network owned by Network Rail and many train operating companies offering services — the Government has to decide the extent to which train service providers can increase the fares.

For instance, the David Cameron Government has recently decided to cap the rail fare increase at one per cent over inflation rather than three per cent, according to T he Guardian.

The UK’s railway regulator — Office of Rail Regulation (ORR) — regulates many things, but not passenger fares. In its Web site, ORR states. “The train operators employ a commercial strategy in setting fares. Ultimately, if that commercial strategy runs contrary to the broader public interest, it is for the government to consider as part of its fares policy.”

ORR’s jobs include ensuring that Network Rail — the owner and operator of the national railway infrastructure (tracks and signalling) — manages the network efficiently and in a way that meets the needs of its users; improving health and safety performance, licensing operators to the network. It also has the job of setting the terms for access by operators to the network and other railway facilities, and enforcing competition law in the rail sector.

In the Indian context — where both passenger and freight services are provided by the public monopoly — defining the job of a tariff regulator, to delink it from politicians will be a challenging task.

Jobs for the regulator

Not that a regulator is not required. In the current context, there are certain functions such as container train operations, which are unbundled. The container train operators would like the haulage charges defined by Railways to be vetted by a regulator.

Then, there are special purpose vehicles that own port-linked projects such as Pipavav Rail Corporation and Kutch Rail Corporation. They have disputed the maintenance charges imposed by the Railways on them. Additionally, many freight users would like to know the extent of cost they cover for passenger services through various forms of freight charges.

There will be a few clear jobs for the regulator — transparently defining the cost of services for passengers and freight services since the Railways uses the same stations and network infrastructure to provide these services; defining the extent of cross-subsidisation possible between freight and passenger segment; and between different passenger segments.

With the Railways planning to start high-speed services through PPP, it will have to define the cost- and tariff-setting norms in those segments.

But, that is all in the future. Immediately, the Congress leadership has to find the courage to do what it preached to its allies.

Published on October 12, 2012
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