Will the Railways review subsidy on passenger fares?

Indian Railways offers a subsidy of 47% per ticket amounting to Rs 56,993 crore to keep train travel affordable. Now, the Parliamentary Standing Committee on Railways has recommended that the government-run transporter review losses on account of social service obligation, including pricing of fares below cost.

Passenger fares have remained a sensitive issue, since rail has remained an affordable means of transport for the masses. The passenger fare is cross-subsidised through the freight segment by the Railways.  

The standing committee in its report submitted on December 13 noted that Indian Railways has to take into account larger social and national interests in formulating its policies and undertakes certain uneconomic operations in passenger services to provide affordable transport facilities to various sections of society.

“Indian Railways also operate certain uneconomic lines for strategic reasons. The losses incurred on this account fall under Social Service Obligation. Net social service obligation for the year 2022-23 stood at Rs 40,190 crores,” noted the committee.

Major components of social service obligations are the pricing of fares below cost, losses on parcels, luggage, postal and catering services and losses on suburban services.

The Committee said that to limit these losses Indian Railways must undertake a comprehensive review of these losses.

“Further losses on categories like catering services must be eliminated on a priority basis. The Committee urged the Ministry to endeavour to provide quality food at competitive prices and simultaneously aim to reduce Social Service Obligations on account of catering services,” it added.

The committee also called for increasing the fares of AC coaches to cover up the losses.

Will railways take the bold step? According to experts, passenger fares and subsidies offered by railways are a politically sensitive matter and all governments have treaded cautiously in the matter.

During the Covid-19 lockdown, Indian Railways discontinued Passenger Trains and increased the minimum ticket price from Rs 10 to Rs 30, aligning it with Express Train fares. The move was to discourage overcrowding in passenger trains during the pandemic and the increased fares continued over three years. However, under mounting pressure and passenger grievances, the public transporters slashed the fare to Rs 10 in February 2024.

For AC services in trains like Shatabdi, Rajdhani and Duronto, Indian Railways introduced dynamic pricing in 2016 under which base fares will jump by 10% for every 10% of seats booked on these trains, with a cap of 50% hike in the original fare. The aim and objective of introducing trains with dynamic fares is to provide rail users the facility of travelling at short notice by paying higher fares during specific periods when there is heavy rush.