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Wednesday, July 18, 2018

‘Only 3-5% of commuters unable to afford hiked local fares’

Report says only those earning less than Rs 5,000 per month to be hit by the fare hike.

Written by PRIYAL DAVE | Mumbai | Published: June 23, 2014 1:22:02 am
Mumbai railway Mumbai railway

Contrary to the view that increasing fares of suburban railways will make it unaffordable for a large section of commuters, a report by PricewaterhouseCoopers (PwC) on the passenger profile of Mumbai suburban railways suggests only three to five per cent of them might be unable to afford railway travel if fares are increased every year.

A detailed analysis of passenger profile and revenue maximisation options from ticketing and non-ticketing options are part of the report submitted this week to the Mumbai Rail Vikas Corporation (MRVC).

The report says there are only four per cent of commuters who earn less than Rs 5,000 per month and will be affected by annual fare hikes over a period of time.

It says the largest segment of the 7.7 million daily commuters, or 36 per cent of the total commuters, fall in the income category of
Rs 10, 000-Rs 20,000 per month, followed by 28 per cent in the income bracket of Rs 5,000-Rs 10, 000 per month. An 18 per cent of commuters belong to the no-income category, mainly cstudents, housewives, retired personnel and those on social trips.

“A very small minority of commuters fall under income segments that may find fare hikes beyond affordability, and such customers may be directly targeted for any subsidies,” the report says. “The low and middle-income group commuters prefer to travel by second-class using MST (Monthly Season Ticket). However, the monthly expenses are still below the affordability index, showing possibility of increasing MST fares without affecting the affordability of the lower-income strata,” the report states.

The report comes in the wake of the fare hike on Friday when the Railways doubled fares of season pass tickets, in addition to a 10 per cent hike in fares across all categories of trains.

Under its World Bank-funded Mumbai Urban Transport Project (MUTP) phase 2, the MRVC had appointed PwC as consultants to study ways of maximising revenues for the suburban railways.

A proposal to reduce the discounting of 70 to 85 per cent offered in season passes was suggested by the consultants during an initial report on fare maximisation last year. Based on the recommendations, the Railways decided to reduce the discounting, said railway officers.

The consultants have suggested that immediate correction of fares and using non-fare measures including real estate development, commercial publicity, station rentals and cess collections have the capacity to help the Railways earn anywhere between Rs 14,000 crore to Rs 40,000 crore over the next 10 years.

The report has also found that the fares of the widely used second-class season pass in suburban railways were much below the global transport affordability index. Typically, it should be between 5 to 10 per cent of monthly income.

The study found that despite 90 per cent of the MST commuters making 44-56 trips per month, the Railways offered a discount of about 70 per cent on second class MST fare and up to 85 per cent on first-class MST, against the global urban rail systems, including Delhi Metro, where discount on season passes is between 10 to 40 per cent.

While analysing the revenue from fare box or ticket sale, the report states that despite ticketing contributing to 95 per cent to the revenue, it only meets up to 60 per cent of the operating expenses of the suburban railways.

While the Railways had a profit of Rs 41crore in fiscal year 2004-05, in 2011-12, it incurred a loss of Rs 660 crore.

“Despite 85 per cent of tickets being season passes, its contribution to fare box is only 53 per cent against the card tickets, which comprise only 15 per cent of the tickets on suburban railways and contributes 47 per cent to the revenue from ticket sale,” states the report.

The report concludes that given the operational expenditures and the need for infrastructure investment in suburban railways, the Railways will have a financial burden of Rs 50, 000 crore.

Commuters’ Willingness to Pay

The consultants surveyed a sample of 6,200 people to find that commuters have expressed at least 10 per cent Willingness To Pay (WTP) for the existing level of services, irrespective of the income group, trip distance or travel class. Also, 83 per cent of those surveyed said they would continue to use the suburban system even if fares are hiked beyond 10 per cent. Interestingly, the maximum amount of WTP of 19 per cent was from the income group of Rs 5,000-Rs 10,000 for a first-class season ticket.

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