Indian Rail Raises Fares to Pare Losses From Subsidized Travel

Indian Railways, losing more than $4.5 billion annually from passenger services, will raise fares this month as Asia’s oldest network seeks funds to pay for upgrading facilities.

The fare increase, ranging from 0.02 rupee to 0.10 rupees a kilometer, will come into effect from Jan. 22 and help the carrier add 66 billion rupees ($1.2 billion) in revenue a year, Railway Minister Pawan Kumar Bansal told reporters in New Delhi today. There is no increase in freight rates, he said.

The railroad operator will still lose 250 billion rupees in the year ending March 31 from subsidized passenger services, Bansal said. The Ministry of Railways has been relying on freight charges and debt to purchase wagons and add new lines as the government eschewed fare increases amid opposition from political parties.

Dinesh Trivedi, who sought to raise fares in March, quit as rail minister within days of his decision after his Trinamool Congress party opposed the move. His successor scrapped some of the increases. Trinamool later quit Prime Minister Manmohan Singh’s coalition government.

The railways carries 23 million passengers every day, Bansal said. Travel by air-conditioned coaches account for only 0.3 percent of all passenger traffic on the network, he said.

India has added only an average 180 kilometers (112 miles) of railroads every year since gaining independence in 1947, according to the rail ministry. The nation currently has about 65,000 kilometers of track network. By comparison, China plans to expand its network to 120,000 kilometers from 91,000 kilometers in the five years ending 2015.

Indian Railways plans to borrow 150 billion rupees this year as it adds more trains and replaces old coaches and wagons, Vijaya Kanth, head of finance at the rail ministry, said at the same briefing today.

The rail ministry separately cut its spending plan to 510 billion rupees for this fiscal year, from 601 billion rupees proposed in the annual rail budget in March, after earnings from carrying commodities fell short of target, Bansal said.

To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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