Finance Minister Arun Jaitley on Tuesday spelt out the roadmap for the Indian Railways — two months before he is set to present the Union Budget that will comprise the rail budget for the first time in Indian history.
The Minister signalled that the Union government will resist populist measures, focus on improving the railway station infrastructure, monetise railway assets for commercial activities, outsource train hospitality and most importantly, make consumers pay for the services they receive. Jaitley said the Indian Railways got “caught in the battle where populism prevailed over performance.”
After the failure of flexi-fare system, this seems to be the only alternative left with the Railways in order to meet its increasing financial burdens. The Railways has also been instructed to keep in its mind prior to doling out any scheme about its competitors as airways and roadways are making a hole into the passenger share of the national transporter.
“The first essential principles of running any establishment, particularly a commercial establishment, are that the consumer must pay for the services that they receive,” he said, while speaking at a workshop organised by the Railway Ministry.
The power sector companies ran into debt as consumers were not paying for services in 1990s until sector reforms came in 2003. The highways sector was booming because consumers paid through toll taxes or cess on fuel, he noted.
“Therefore, world over only those services have succeeded where the financial model is — consumers must pay for services they receive. We turned this whole theory upside down by self-imposed indiscipline that populism requires consumers do not pay for the services they receive,” he said.
At present, the Indian Railways recovered 57 per cent of the travel cost on passenger tickets. This meant if it spent Rs 100 on a train journey, it recovered Rs 57 from passengers and the rest went as subsidy. Even though the Indian Railways had monopoly over the rail network, it faced competition from alternative modes such as air and road. The pressure of maintaining highest standards to compete with the alternative modes of transportation had “started reflecting” on the Railways’ earnings.