Railways to extend sops for digital transactions till June 30

Govt had waived off service charge on Nov 23 as an effort to encourage cashless transactions

Adding to the woes of Indian Railway Catering and Tourism Corporation (IRCTC), the government on Friday decided to extend the service charge waiver on railway tickets and other incentives for digital transactions for two more months. The decision will have implications on the plan to list IRCTC as an annual waiver will lead to a loss of Rs 500 crore to the company’s revenue.

The government had waived off the service charge on November 23 last year as an effort to encourage cashless transactions post demonetisation. Free insurance scheme was also implemented on December 9. The railways ministry had written to the finance ministry seeking a re-imbursement of the amount waived off as service charge. 

"We have received instructions from the ministry of electronics and information technology, advising railways to extend the incentives at least till June 30. So, existing incentives will continue," said an official source close to the development. “The waiver of service charge is a cause for concern as it may affect revenue of about Rs 500 crore for IRCTC annually. On the other hand, free insurance for passengers will lead to an additional outgo of Rs 36-40 crore annually,” said Mohammed Jamshed, member (traffic), Railway Board. IRCTC used to share half of its service charge revenue with the Railways.

Interestingly, this comes at a time when a merchant banker is set to be appointed by the first week of April to initiate the listing process of IRCTC. For this, the Department of Public Asset Management has already floated a request for quotations. IRCTC used to charge Rs 40 per ticket for bookings in air-conditioned classes and Rs 20 per ticket in sleeper class. In 2015-16, railway ticketing generated Rs 551 crore in income for IRCTC, up 115% from Rs 256 crore in 2014-15. On a monthly basis, the IRCTC revenue from service charge comes to an average of Rs 40 crore, of which about Rs 20 crore is the share of the railways.

Three companies Shriram General Insurance, ICICI Lombard General Insurance and Royal Sundaram General Insurance are currently providing insurance cover for railway passengers. When asked about the changes that the companies are feeling after Dipankar Acharya, country head, affinity and strategic relationships of Royal Sundaram said, “The only difference that we are feeling after making it free insurance is that the data which was shared to us on a daily basis is now being transferred live.” 

As per the current scheme, in the case of death or permanent disability of the traveller, Rs 10 lakh is provided. For permanent partial disability, the coverage extends to Rs 7.5 lakh; for hospital expenses, the coverage is up to Rs 2 lakh. In addition, the insurers provide Rs 10,000 for transportation of mortal remains.

Other key digital initiatives by railways included 0.5% discount on season tickets purchased through digital means and 5% discount on payment made online for availing services like online booking of retiring rooms and catering services.

On a different track

• Service charge was waived on online booking to encourage cashless transactions after the note ban 
• Free insurance for online tickets was also started on December 9
• IRCTC used to charge Rs 40 per ticket on bookings for AC classes and Rs 20 for sleeper class
• In 2015-16, railway ticketing generated Rs 551 crore as income, up from Rs 256 crore in 2014-15