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Explained: What is IRCTC’s convenience fee, and why did the govt reverse its order on revenue share?

On Friday, within an hour and half of opening of the markets, IRCTC prices fell sharply by as much as 29 per cent to hit day's low of Rs 650.10.

Written by Aashish Aryan , Edited by Explained Desk | New Delhi |
Updated: October 29, 2021 2:26:29 pm
Convenience fee is charged by IRCTC as a form of service fee from users who use its internet ticket booking platform to book train or air travel tickets.

Within 24 hours, the government withdrew its order asking the Indian Railway Catering and Tourism Corporation (IRCTC) to share 50 per cent of its revenues collected from convenience fee from users. The decision led to correction in share price of the company on Friday morning and it fell sharply by up to 29 per cent.

What is the convenience fee and how much does IRCTC charge per ticket?

Convenience fee is charged by IRCTC as a form of service fee from users who use its internet ticket booking platform to book train or air travel tickets. A majority of the fee, however, comes from train ticket booking.

For online booking of tickets till November 22, 2016, IRCTC levied a service charge or convenience fee of Rs 20 plus tax per ticket for non-air conditioned (AC) travel classes, and Rs 40 plus tax per ticket for air conditioned class tickets. For nearly three years after that, this fee was withdrawn by the Ministry of Railways as an initiative for promotion of digital transactions.

On September 1, 2019, IRCTC restarted collection of convenience fee on ticket booking, charging Rs 15 plus goods and services tax (GST) per ticket on booking of non-AC tickets, and Rs 30 plus GST for AC class tickets. For ticket payments done online either through Bharat Interface for Money (BHIM) or Unified Payments Interface (UPI), IRCTC charges a lesser convenience fee of Rs 10 plus GST per ticket for non-AC class tickets, and Rs 20 plus GST for AC classes.

In 2020-21, online ticket bookings via IRCTC dropped as much as 43 per cent, which led to a substantial fall in convenience fee collection as well. IRCTC still managed to collect Rs 299 crore in convenience fee alone.

In 2019-2020, which was a non-pandemic year, 27 per cent of IRCTC’s revenues came from internet ticket bookings, while they had a 71 per cent share in earnings before interest and taxes (EBIT), compared to 17 per cent, 8 per cent, and 3 per cent share in EBIT that catering, packaged drinking water, and travel and tourism had, respectively. The total convenience fee collected by IRCTC during that fiscal was Rs 352 crore.

How did the government directive on convenience fee sharing impact IRCTC share price?

On Thursday, after market hours, the state-run online railway ticket booking platform informed the stock exchanges that the Ministry of Railway had asked IRCTC to share in a 50-50 ratio the revenues earned from the collection of convenience fee. The decision, IRCTC said in the notification to exchanges, was to be effective November 1. IRCTC shares had ended at Rs 913.75 on Thursday.

On Friday, within an hour and half of opening of the markets, IRCTC prices fell sharply by as much as 29 per cent to hit day’s low of Rs 650.10.

However, nearly two hours after the markets opened and the sharp fall in share prices, the Department of Investment and Public Asset Management said that the Ministry of Railways had decided to withdraw its decision of asking IRCTC’s to share 50 per cent revenue collected from convenience fee. Following the decision, IRCTC share prices recovered sharply to trade at day’s high of Rs 906.60, before stumbling back a little. At 1:05 PM, IRCTC shares were trading at Rs 856.45, which is 6.2 per cent lower compared to last day’s close.

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