Press "Enter" to skip to content

Flexi fares? Price hike? What to expect for Railways in upcoming Budget

In 2017, the Railway and Union Budget will be merged and presented in a single statement on the same day; a move that will do away with the age-old practice of having two separate statements of income and expenditure for the Indian Railways and the Union Budget.

This year, the Union Budget has also been advanced to February 1, a move that Prime Minister Narendra Modi said, will ensure that funds are allocated before the start of the new fiscal.

With the budget only a month away, a Railway Ministry official was quoted by newswire service NewsRise on Monday. The quotes were tweeted by BTV India.

According to the Railway Ministry Official, in the upcoming Budget we could expect,

a) Fares hike: “The Ministry is considering raising the passenger fares by 2 – 5% in the next fiscal,” the Railway Ministry official said.

Passenger fares have been left unchanged in the last two Budgets since the BJP government came into power. However, according to a report by The Indian Express, the tradition of the NDA government to keep passenger fares unchanged may have to be done away with in the upcoming Budget as the Railways is looking for avenues to raise funds.

According to the aforementioned report, the Finance Ministry had rejected a proposal of the Railway Ministry to raise Rs 1,19,183 crore to create a Rashtriya Rail Sanraksha Kosh or a safety fund. While the FinMin agreed to make only 25% of the funds available, it asked the Railways to raise the other 75% on its own. So instead, the Railways may levy a safety cess on passenger fares.

The IE report quoted an official as saying, “Though the Railway Minister is not in favour of raising fares at this juncture when passenger bookings are falling and fares of AC-2 and AC-1 are already on higher side, the reluctance of Finance Ministry to provide a bail-out package has left the minister with no option.”

b) Flexi fares: “Likely to make passenger fares flexible, mimic air fares”

The Railways is likely to make passenger fares flexible, much like air fares, the Ministry official said. Currently air fares depend on the availability of tickets, prices set by competitors, routes, holiday season, and so on.

The Indian Railways had introduced the flexi fare or surge price on train tickets on September 9 on most Rajdhani, Shatabdi and Durnoto train tickets. Under the flexi fare system, the base fares of these trains would have increased by 10% with every 10% berths sold subject to a prescribed ceiling limit. There would be no change in the existing fare for first AC and EC class of travel, a statement by the government read at the time.

Over and above this, other supplementary charges like reservation, Superfast, catering, service tax charges would be applicable separately, it said. According to the statement of the Railway Ministry official, it is likely that the flexi fare system may be levied across the board.

c)Freight tariff may remain unchanged”

The Railway Ministry is likely to leave freight charges unchanged for the next fiscal on the back of weak goods shipments and weak demand for cement and fertilizers, the Railway Ministry official said.

While demonetization has thwarted many infrastructure plans and derailed the transportation and logistics industry thanks to the unavailability of enough cash to carry out businesses, the anticipation of GST roll out is also likely to encourage Railways to keep freight charges unchanged.

In an earlier DNA report, we’d said that the Railways was expecting significant erosion of its freight business under the GST regime.

“…the likely implementation of GST with effect from April 2017 accompanied by the removal of Octroi duties/check posts, may further adversely impact the railway’s share of freight business,” minutes of the quarterly meeting of the Railways for deciding on procurement has mentioned.

“There is an apprehension of Railways freight traffic coming down due to the GST regime. The most important factor is what would be the GST rate on rail transport and how it compares with road transportation. We are looking at it very keenly,” a director of the Railway Ministry had told DNA Money.

While the GST Council chaired by Finance Minister Arun Jaitley is still undecided on major key issues which is likely to push the roll out date further from the targeted April 1, 2017, the Railways sees major freight traffic to move to road transport. This is because of less check points, consolidation of warehouses under GST regime, which may “lead to higher parcel sizes being moved on road more than what was being done earlier. All these may adversely impact movement of goods through rail,” the railway official had said.

This may prompt the Ministry to keep railway freight prices unchanged for the next fiscal.