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7th Pay Commission Expenses ‘Burdened’ railways rings FinMin, but govt ain’t sharing the load

Railways has said that the part of the burden on its revenues by way of discharging its “public service obligation” be picked up by the government.

Written by Avishek G Dastidar | Updated: January 13, 2016 6:32:50 am
Tatkal ticket hike, Rail fare hike, Indian Railways, Rail fare hike, Rail fare increase, Indian Railways news, Tatkal ticket booking, Tatkal booking, Sleeper class fare, Second Class Tatkal charges, Railways news, Railways fare hike, India news, Indian express Railways has said that the part of the burden on its revenues by way of discharging its “public service obligation” be picked up by the government.

ITS FINANCES in a precarious position, the Indian Railways has now demanded that the government share its burden of remaining affordable to the poor. The cost of that burden has crossed a never-before Rs 32,000 crore.

The impact of the 7th Pay Commission kicking in on salaries and pension, the input cost of rail operations is slated to shoot up beyond viable levels next fiscal. The finance ministry has categorically stated that it will not be able to help railwayss on matters of salaries and pension. Internally it is contended that the refusal by the government to lend a helping hand is tantamount to pushing the railways to the brink of a steep fare hike next financial year. Now, railways has taken a principled stand that the part of the burden on its revenues by way of discharging its “public service obligation” as a national transporter be picked up by the government and it has engaged with the Ministry of Finance for the same.

The problem faced is that there is no official definition of what constitutes public service obligation for a government-owned transporter. Therefore, it has locked horns with the finance ministry over working out such a definition for the first time.

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As per documents accessed by The Indian Express, the finance ministry has said that it wants an independent body to work out an official definition of “public service obligation”, while the railways ministry prefers an inter-ministerial committee to do the same and work out its monetary impact on its revenues.

According to the railways, the financial burden of its public services — commodities carried at sub-cost rates, a range of myriad concessions to various categories of passengers etc — has touched a never-before high of Rs 32,067 crore. “Till the committee frames a long-term formula … the government revenues may bear a certain percentage of losses for the year 2015-16 as an interim measure,” the Railways has told the finance ministry as well as the Railways Convention Committee of Parliament. It was also highlighted this in the Railways Consultative Committee, chaired by railways minister Suresh Prabhu, which consists of MPs and secretaries of some other ministries.


It is learnt that railways has informed the finance ministry that it offers 53 types of concessions including free travel to several categories of passengers. It has further argued that the total revenue forgone towards concessions was Rs 1,423 crore in 2014-15, up from Rs 759 crore in 2010-11.

It also carries essential commodities — like fruits, vegetables, paper etc. — at below-cost so that their market prices are not adversely affected. It claims that its loss on account of essential commodities last year was Rs 53.31 crore.

Amid all this, the Pay Commission burden of an additional Rs 32,000 crore will kick in at a time when railways is trying desperately to decrease the cost of its operations by way of lowering the cost of the power and diesel it procures and bringing down its Ordinary Working Expenses. Although no official move has been made yet, the idea of a fare hike to aid finances next fiscal has started doing the rounds in top circles of the railways board. The problem with such a move is that a hike in fares of long-distance services would make low-cost flights a direct competition of the AC classes. Moreover, at a time when railways is losing suburban passenger numbers, officials feel it could be unwise to make local train travel expensive.

Even if it hikes passenger fares, subject to a political nod, railways has said that it cannot increase its freight rates just to earn more.

“Freight segment, which yields 65 per cent of the revenue, is already overpriced both relative to the passenger fares and benchmarked to any comparable countries in the world … Any further increase in freight rates would not only out-price railways freight and lead to erosion of its market share, it would also have a severe impact on the country’s environment and transport network,” it has said.

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