“Subsidy” gives a wrong impression in context of IR passenger fares. Even Niti Ayog has concluded that Fares of AC2,ACC,ACI,EC are much morehigher than the equivalent Luxury Bus fares. Still IR is losing on these classes. The loss is because of excessive resources used by IR (i.e. internal inefficiencies) and not due to low fare as IR claims. Similarly the so called under recovery or subsidy say 50 Rs. per 100 Rs. spent by IR in second class is made up of two components. (1) Extra input by way of inefficiency or financially imprudent ways of working of IR (which may be 25Rs) and (2) lower fare than the reasonable economic value (which then shall be 25Rs).
If inefficiencies in IR can...
more... be clipped down, the costing itself shall come down to Rs 75 instead of 100. The above ac classes shall be profitable at present fares.The subsidy burden shall actually be halved even without increasing fare. The general class fares which had not been increased for a decade are today reduced to a ridiculously low level needs correction, but can be managed with reasonable escalation for coming few years without much troubling the people.
If done properly, privatisation in Rly sector can bring in efficiency as has been observed in road and airline sectors, the costing of a seat is likely to be drastically reduced mainly through efficient use of huge resources which IR deploys for conducting its business, rather than increase of fares.
(1) Privatisation has to be brought to bring in competition and improve the efficiency rather than to eliminate the govt role altogether. Nothing should be left totally in the hands of govt. or pvt. Players, else the results will be disastrous. Best way out is to let pvt. Players and govt owned companies compete with each other and customer have a choice to select the best suited service. Presence of govt ensure elimination of looting of consumers through formation of cartel amongst pvt. Companies.
(2) Telecom sector is the best example where govt. owned BSNL is competing with plethora of pvt sector companies and public is benefitted through reasonable price of the services availed. Take the case of airlines, bus operators, taxi operators where intense competition between pvt. & govt. players result in very high efficiency of operation and passengers are reaping the benefit.
(3) In case of railway transport in India, there is monopoly of govt. owned IRlys, hence there had been little improvement in working practices. We see trains running with astonishingly low occupancies even below 10% running for months and years causing huge financial losses which adds to the costing of IR. If we start enumerating inefficient operations in IR, the list will run into several pages. All these adds drastically to the losses or increase the cost of seat/ berth offered
(4) Huge advantages that monopolistic IR enjoy over road & air transporters
- Energy is supposed to be the main cost component in transportation, rail transport consume one sixth the energy consumed in road transport, and even lesser than air transport.
- Economies of scale- One truck usually carry 15-20T as against about 4000-5000T by railways. One bus carry about 40-50 passengers as against about 1000-2000 passengers by train.
(5) Even after the above advantages, employee cost of IR is huge 68% of total IR revenue. Whereas road operators in spite of inherent disadvantages are making handsome profits and expanding their business at rapid pace.
The solution lies mostly in adopting innovation and out-of-box thinking and critical evaluation of every activity of IR and eliminating activities which are redundant today due to automation/ technological development. There are two aspects,
-1- IR is using too many resources than it should be. Cost control is required by actions like
o Elimination of the unnecessary posts, activities
o Transferring resource consuming and unrelated entities like schools, colleges, hospitals, Metro trains etc to respective deptts. Like Education, Health, Urban Development/State Govts and many more.
o Identification of loss making entities like trains, stations, projects & Rationalisation of the same to reduce/ eliminate losses.
o Study of the facilities provided to passengers, employees, vendors, coolies etc. The facilities enhancing productivity has to be encouraged, the unnecessary ones need to be rationalised.
-2- IR is not generating sufficient revenue because the resources are not put to optimum use. Introducing trains without adequate market survey many a times on the routes with very low demand. Investing the scarce resources on financially unjustified lines with very low or negative rate of return.
