Indian Railways plans to cut costs without hiking fares: Report

Indian Railways plans to cut costs without hiking fares: ReportRepresentational ImageReuters

Indian Railways is reportedly planning to slash operational costs to raise revenue without hiking ticket fares.

The public transporter estimates to cut its annual electricity bill, which currently stands at Rs 12,000 crore, by nearly 20% in the next fiscal year, official sources told The Financial Express.

It is also planning to reduce its total working expenses (TWE) by 15% in next fiscal year mainly by “optimising” employee and fuel costs, keeping “essential transfers to depreciation and pension funds” at the same level. The efforts would keep the TWE in 2016-17 at the same level as the Rs 1.62 lakh crore projected for the current year.

The railways will also attempt to increase “non-farebox revenue”, sources said.

“The railway minister is not keen on increasing passenger fares or freight tariffs. Our major focus now will be on generating revenue from (non-traffic) sources, mainly advertising, parcel-leasing, export of railway equipment and land monetisation. We also intend to cut working expenses in a meaningful manner,” said a senior railway official.

Though it expects “little help” from the Finance Ministry to meet the additional expenditure resulting from the implementation of the Seventh Pay Commission recommendations, the transporter sees less scope for increase in passenger or freight rates.

The railways freight traffic stayed 7% below the target set for the April-December period in the current fiscal year. Passenger bookings were also 5% lower than projected.

But experts believe the railways “will have no option but to hike tariffs, rationalise staff and trim allowances” in the upcoming budget “if it wants to avoid its operating ratio (OR) exceeding 100% in FY17.”

“Staff rationalisation will take three-four years to have an impact. Logically, railways will have no option next fiscal except to increase passenger fares. Current fares do not cover the cost, especially for the ordinary classes. Politically, it wont be easy to raise fares, though,” a senior official said.

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