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Wednesday, January 29, 2020

Railway budget: Non-tariff revenue (or non-fare box revenue)

Railway Minister Suresh Prabhu put unprecedented emphasis on this term in his rail budget speech, and also in the philosophy of the budget. What does it mean?

Written by Avishek G Dastidar | Published: February 26, 2016 1:13:16 am
rail budget, railway budget, rail budget, suresh prabhu budget, suresh prabhu rail budget, rail budget highlights, railway budget highlights, india news Seeking to supplement traditional passenger and freight revenues

The Railways earns money by carrying passenger and goods for which it charges money through fares and freight respectively. These are tariff earnings or fare-box revenue. Everything else falls in the category of the Railways’ non-tariff earning or non-fare revenue.

On Indian Railways, this component has been long neglected for want to response from the market, and also due to a lack of effort from the Railways, which has considered these ‘non-core’ areas — which they admittedly are.

However, it carries an immense potential for earning some extra bucks if explored properly — and that is what the Railways wants to do now.

Advertising is a major source of non-tariff revenues. The Railways will install around 20,000 screens across its ecosystem to display ads. An internal survey pegged the revenue potential from advertising alone at Rs 10,000 crore eventually. The Railways will monetise its databank on passengers so that frequent travellers get better value-added, targeted services. These are all non-tariff earnings.

These earnings are reflected in the Railways’ books as Sundry Earnings, which stood at an estimated Rs 6,229 crore this year. For the next year — that is, the next fiscal — that target has been scaled up by 53 per cent to Rs 9,590 crore.

All add-on services which are not free of cost, including Wifi and concierge service, and also earnings from freight sidings, etc., are Sundry Earnings.

These earnings typically form around 4-5 per cent of the Railways’ earnings. For global railway majors like Japan and the European countries, this proportion hovers around 15-30 per cent. This is seen as an untapped area of earnings in India. The Railways now intends to at least double its figures in the next two years, or perhaps do even better.

In a pre-budget meeting, Prime Minister Narendra Modi had asked the Railways to put maximum stress on advertising. “Learn from cricket, which has ads even on the stumps,” sources quoted him as having said.

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