Tucked into a table in the >Bibek Debroy committee report on restructuring the railways is a fascinating nugget of information on just how much an Indian train makes or loses every time it runs.
Mr. Debroy, an economist, heads the Committee for Mobilization of Resources for Major Railway Projects and Restructuring of Railway Ministry and Railway Board, which submitted its report to the Railways Minister on Friday. In the report, Mr. Debroy and his colleagues argue that many decisions “like increase in fare, introduction of new trains, provision of halts and establishment of new projects” are taken for reasons other than “commercial considerations”. Further, because of the nature of the accounting systems it uses, the gains and losses of the Railways on its investments are impossible to measure.
So the committee makes an attempt to work out the cost of running 16 trains – the faster and more expensive Rajdhanis, Shatabdis and Durontos – as well as the revenue earned in ticket sale from each train, to work out whether the train runs – literally – on a profit or loss. While the exact breakdown of the math is not shared in the report, the authors say that such a calculation should account for “different types of coaches, power car, pantry and parcel van, add depreciation and interest costs, add terminal and line haul costs and so on, imputing perhaps costs because of loss of path to goods trains”.
Here’s what they find: half the trains are running at a loss, every trip. This includes all the five Durontos the committee looked at, two Rajdhanis and one Shatabdi. On average, across the 16 trains, every train runs a loss of Rs 1.7 lakh per trip. Only the Shatabdis, on average, run a profit, with the Delhi-Bhopal Shatabdi being the most profitable.
The committee’s argument is that even on routes that serve relatively better-off travellers, train tickets are simply priced too low. No doubt, this has an impact on the Railways’ faltering finances - there has been a growing divergence between earnings from passenger fares, and from freight, over time, budget documents show. In effect, freight subsidises fares. So in 2012-13 for instance, the Railways made just over Rs 37 from each passenger.
The bulk of the Railways’ long-distance passenger earnings still come from its three cheapest ticket segments, who make up over 95 per cent of all passengers (on non-suburban routes), budget documents show.
Can they afford to pay more? The committee thinks so, with the caveat that service delivery needs to improve alongside. Indeed a >2012 NCAER survey of consumer incomes and attitudes to the Railways had suggested as much; ticket prices matter substantially, especially to the poor, who might choose not to make a trip if prices rise, the study found, but better services – faster trains in particular - will make consumers willing to pay a little more.
Successive governments have been at pains to say that the Railways are not meant to be purely profit-making, and that they are a social service as well. The Debroy committee makes an important point – the exact cost of this social service needs to be properly accounted for before bigger decisions on fare pricing are taken.
