May 17 (Bloomberg) -- Indian Railways delayed a planned 14 percent passenger-fare increase only hours after having announced it to let the nation’s new government decide whether to proceed with an unpopular measure that will help narrow a loss exceeding $4.5 billion.
The state-owned company that operates Asia’s oldest rail network late yesterday announced it was putting on hold the proposed passenger-fare rise and a 6.5 percent increase in freight rates not long after it had said they would go into effect May 20.
Fare increases are a politically sensitive issue in Asia’s third-largest economy, where creaky infrastructure and lack of alternatives mean many poor people commute by train. About 13 million people ride Indian Railways each day. The company has a workforce of 1.54 million people, according to its website.
The proposed passenger-fare increase is above the rate of inflation. India’s consumer-price index climbed 8.59 percent year-on-year in April.
The fare announcements came on the day the Narendra Modi-led Bharatiya Janata Party had the biggest victory in an Indian national election in 30 years. Modi’s BJP yesterday ousted a Congress party-led coalition after a decade in power.
The world’s third-largest rail network is working to curb losses that stem from below-cost fares. It is seeking an investment of 14 trillion rupees ($238.2 billion) by 2020 to upgrade and expand facilities. The nation has a track network of about 65,000 kilometers (40,000 miles), while China plans to expand its network to 120,000 kilometers from 91,000 kilometers in the five years ending 2015.
Indian Railways, which plans to spend 452.6 billion rupees in the fiscal year ending in March, 2015, won’t change reservation fees, it said.
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