October 29, 2021 12:13:18 pm
In a curious policy flip-flop, the Ministry of Railways on Friday reversed a decision taken less than 24 hours earlier, in which it had asked Indian Railway Catering and Tourism Corporation (IRCTC) to share with it half the revenues collected as convenience fee from users.
IRCTC, a government-controlled company that provides ticketing, catering, and tourism services, had informed the stock exchanges after market hours on Thursday that the ministry had written to it, asking to share the revenues from convenience fee in a 50-50 ratio.
“Government departments need to be mindful of the interest of minority shareholders, more so since we have a huge privatisation pipeline lined up, the success of which also depends upon policy certainty,” a senior official of the Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance said.
“Our department (DIPAM) has advised and sensitised all departments to do proper due diligence before announcing policy changes in listed companies,” the official said.
IRCTC shares were hammered on Friday, crashing 29 per cent before recovering to close the day at Rs 845.65 — 7.45 per cent lower than the previous day’s close. The IRCTC stock, which had closed at Rs 913.75 on Thursday, fell to Rs 650.10 in the first hour of trading.
The intra-day swing in the share price of IRCTC wiped out up to Rs 4,500 crore of retail investor wealth and from the company’s market cap, stock market analysts said.
“(Markets regulator) SEBI should investigate trading patterns in IRCTC, as the convenience fee sharing was announced post market hours yesterday. As the stock cracked in the morning and huge buying was done by some traders, the decision is reversed. This is not a good example for orderly functioning of the markets,” a fund manager said.
The convenience fee that IRCTC charges the users of its Internet platform to book train or air tickets, is a major source of revenue for the company. This fee is not part of the fare that passengers pay for the journey; it is for the service of online ticket booking offered by IRCTC.
Until November 22, 2016, IRCTC levied a service charge or convenience fee of Rs 20 plus tax per ticket for non-AC travel classes, and Rs 40 plus tax for AC class tickets. The Ministry of Railways then withdrew the fee to incentivise digital transactions.
Three years later, on September 1, 2019, IRCTC started collecting convenience fees again — charging Rs 15 plus GST per non-AC ticket, and Rs 30 plus GST for AC class tickets. For payments done through BHIM or UPI, IRCTC charges a lower fee of Rs 10 plus GST per ticket for non-AC, and Rs 20 plus GST for AC classes.
In the last fiscal, when train services were hit for most of the year due to the Covid-19 lockdown, IRCTC still managed to collect Rs 299 crore in convenience fees. In the non-pandemic year 2019-20, 7 per cent of IRCTC’s revenues came from Internet ticket bookings, and the company collected total convenience fees of Rs 352 crore in that fiscal.
Thursday’s order was an attempt by the Railways to re-start a revenue-sharing arrangement that had been stopped in 2016. The Railways had mandated in December 2015 that IRCTC, which was wholly owned by it at the time, would share half the earnings from the service charge with its parent. This arrangement had continued until 2016.
On Friday, senior Railway ministry officials told The Indian Express that the timing of the decision — subsequently withdrawn — was not right. The sources said that as a consequence of the decision, the government would have got only about Rs 120 crore this financial year, and around Rs 250 core in the next financial year, according to IRCTC’s business projections.
IRCTC has been arguing that while it was not paying its share of the convenience fee to Railways, it was giving concessions for UPI payments, which account for around 30 per cent of ticket transactions, officials said. “That is a clear revenue foregone for the PSU, for the sake of promoting UPI,” a senior official said on the condition of anonymity.
“The erosion of the value of the company in the share markets (on Friday) was bigger than the money the government would have earned from the convenience fee. Looking at this scenario, and to instill confidence in investors, this decision (to reverse Thursday’s decision) was taken,” a top Railway ministry official said.
“Railways has withdrawn the decision on IRCTC convenience fee,” Tuhin Kanta Pandey, Secretary, DIPAM, tweeted on Friday morning.
📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines
- The Indian Express website has been rated GREEN for its credibility and trustworthiness by Newsguard, a global service that rates news sources for their journalistic standards.