Cloud on earnings amid rain of sops

Populist measures may not bode well for railways’ financial health.

With Mamata Banerjee leaving passenger fares untouched and announcing a slew of concessions for technicians of regional film industry, cancer patients and press correspondents, railways’ earnings from passenger operations may be strained further.

The Budget estimates indicate passenger earnings will increase by over eight per cent, but for the third year in a row the Fare Freight Ratio (FFR) remains at a record low of 0.26. FFR is an indicator of the proportion of passenger earnings (in paise) per passenger km to the earnings (in paise) from freight tonnage per km. The fare-freight ratio in case of China is 1.2 and Korea, 1.4.

The low FFR of Indian Railways implies the heavy cross-subsidisation of passenger fares by freight earnings. World Bank sources say India levies the highest freight rates, second only to Germany, as compared to major freight railways like US Railroads, Chinese and Russian railways.

According to budgetary estimates of 2010-11, passenger earnings will grow 8.60 per cent to Rs 26,126.47 crore over the revised estimates of Rs 24,057.03 crore for the current fiscal. In 2009-10, the target for growth in revenues from passenger operations had been pegged at 10.80 per cent.

I I M S Rana, former chairman of Railway Board, said: “The Budget presented today is not a healthy one for the railways in terms of finances. Freight rates should have been cut. In not increasing passenger fares, and by announcing a second series of concessions, the money available for development projects has been made less by that amount.”

Analysts say the concessions announced would cost the railways Rs 100 crore annually. Vivek Sahai, member (traffic), Railway Board, said while they stand to lose Rs 1 crore a month by providing free travel to cancer patients in AC-3 tier and sleeper classes, the estimates for the other cuts announced today are being worked out.

Mamata Banerjee in her Budget speech held: “In the last Budget, I had announced several concessions under the ‘Izzat’ scheme, for press correspondents and students of madrasas, higher madrasas and senior madrasas. These have been very popular and I propose to continue with these concessions.”

In Rail Budget 2010-11, technicians of regional film industry when travelling for production have been made eligible for 75 per cent concession in second sleeper, 50 per cent in first class, AC chair car, AC-3 tier and AC-2 tier in all trains, including Rajdhani Express, Shatabdi and Jan Shatabdi expresses.

Cancer patients, who were granted 75 per cent concession in AC-3 tier and sleeper classes will now be able to travel free. The minister has extended the 50 per cent concession to dependent children of accredited press correspondents for travel along with their spouse once a year. Banerjee has also reduced service charges on AC class to Rs 20 from Rs 40 and on sleeper class to Rs 10 from Rs 50.