A blueprint prepared by the Railways has just confirmed its worst fear: within the next three years, domestic airlines will overtake it as India’s most preferred mode of long-distance travel for upper-class passengers. The projection for 2019-2020 is detailed in a blueprint on the future business scenario prepared by the Railway Ministry, raising the first official red flag over the national transporter losing its upper-class clientele to the booming domestic airlines sector.
While speed has traditionally provided the edge for airlines, “price” has now given them a complementary advantage, says the blueprint, which warns that these two factors need to be taken up on an urgent basis.
The blueprint analyses government statistics to show that 25 per cent of domestic air travel happens over inter-city distances within 500 km — a segment where the Railways was always believed to enjoy a monopoly — contrary to popular perception that air travel is chosen only for 800-1,000-km distances.
”It is essential that Indian Railways addresses the two key value propositions of airlines passenger business — price and speed — immediately to sustain its core business in the passenger segment in the future,” it says.
This should serve as a “wake up call”, and require clear cut strategies on pricing and capacity augmentation, it says.
The blueprint is part of an internal assessment report commissioned by Railway Minister Suresh Prabhu and prepared by the Railway Board to map a comprehensive overhaul and possible course correction.
”With the proliferation of airports into small towns and massive thrust of low-cost airlines to Tier-II and III cities, there is a clear pattern emerging of air being preferred for even shorter hauls by passengers,” it says.
Apart from airfares coming closer to rail fares, proactive government policies like UDAAN, which provides for air travel of less than an hour for Rs 2,500 will also provide impetus to the civil aviation sector, the blueprint concludes.
”This should be viewed as an overall healthy trend for the economy,” NITI Aayog member Bibek Debroy told The Indian Express. “For shorter distances, the Railways had started losing share to the road sector, and now for long-distance travel, civil aviation sector has been claiming its share. Eventually, multimodal transport development will happen seamlessly, and it will not be viewed as an either-or binary of road and air travel,” he says.
The number of total passengers carried by domestic airlines has been spiking towards the 100-million mark for the last few years. They carried around 97.8 million between December 2015 and November 2016, the report notes. The comparable classes on Indian Railways — First AC, AC-II, III and First Class — carry on an average 145 million passengers every year.
For Railways, this segment has been either shrinking or plateaued. From a growth of 9.5 per cent in 2014-15, it shrunk to 5.01 per cent in 2015-16, the report notes. ”The 20 per cent year-on-year growth of the civil aviation sector is likely to sustain in the short run-up to five years and then taper out to a 10 per cent average annual growth rate,” it says.
The report says that till Dedicated Freight Corridors are commissioned in full, the average growth rate of the upper class segment will remain a tepid five per cent. “…the number of passengers by air would exceed the upper class rail passenger numbers by FY 2019-20,” it says.
The Railways has been losing passengers in the up-to 100-km segment over the years prompting the Parliamentary Standing Committee to question it a couple of years ago. At the time, the Railways had attributed it to the proliferation of two-wheelers and improvement in rural road connectivity.
“For years, we have refused to see the writing on the wall. This is the global trend in developed economies, wherein the Railways do not serve long-distance passenger travel. That load is rightly taken by air,” says Ajay Shukla, former Railway Board Member (Traffic).
”Railways should ideally cede the market of long-distance services, like Delhi-Chennai and others to air and free up its own capacity for more freight trains, which will be a real contribution to the economy,” says Shukla.