The train has always been a vital lifeline connecting India and Indians—rich or poor. But it is also experiencing rising losses. However, the cure for our railways’ financial woes may prove worse than the disease.
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First, the rising price of connecting India
Rising ‘operating ratio’: That’s the ratio between a company’s total operating costs and its net sales. In August, the government said the railways’ operating ratio is at 107.39%—and in the “concern zone.” This means the Indian Railways spends around Rs 107 for every Rs 100 it earns. Although the government blames this decline in profitability on Covid, the ratio has been on an upward curve since 2016-17.
The reason: The government has always used the more profitable freight trains—that transport goods—to subsidise passenger lines. But freight revenue has been declining since FY2017—as have losses from the passenger side. The result: a widening budget deficit. The government recently announced a loss of Rs 682.69 billion (68,269 crore) in passenger services for FY2022—which essentially wiped out all freight-side profits.
Key point to note: The railways’ passenger traffic has remained mostly unchanged over the past decade—and is, in fact, slightly lower this year. And the growth in freight volume and revenue is measly, at best. In fact, the railways’ share of the country’s freight business has plummeted—from 80% in the 1950s to 27% today.
The fallout: The main casualty of this rising deficit is rail safety—as we saw in the Balasore tragedy—which claimed 275 lives in June. A government audit prepared by the Comptroller and Auditor General of India shows that 75% of 217 “consequential train accidents” between FY2018 and FY2021 were caused by derailments. The key factor: the lack of track maintenance. The fund dedicated to replacing and maintaining the lines cut back on spending on rail safety. The reason: The Indian Railways did not contribute its share due to declining profits.
But, but, but: The Indian Railways has also been splurging on capital investments—in new flashy services like Vande Bharat etc—and funding it by borrowing money. As The Print notes, “The current surge in investment is outsize: Over the past decade it has crossed Rs 13 trillion, with Rs 2.6 trillion this year alone being almost equal to projected revenue!” And yet little is being spent on replacing ageing infrastructure.
The quick fix: Raising prices
An upward curve: While the base price of train tickets has not increased very much, the actual cost to the consumer has been rising for decades—due to various fees and surcharges. Rising demand and so-called dynamic pricing has resulted in a massive spike in recent years. In November, a second class AC ticket on an express train from Mumbai to Patna cost a whopping Rs 9,395—the same as a 2.5 hour journey on a plane. The base fare was only Rs 2,950—but passengers had to pay an added Rs 5,900 in surge pricing. This kind of jump is punitive for migrant workers:
Thousands of passengers from across the country travel to their hometowns in Uttar Pradesh and Bihar during Chhath Puja. “Base price for a sleeper class train ticket is Rs 800. It is a popular route of travel for migrant labourers in Mumbai who visit their hometowns during Chhath. To charge an additional Rs 1,825 to these poor people for a sleeper class ticket is absolutely unfair,” [a passenger] added.
Count the coaches: The public purpose of the Indian train is to offer all Indians the freedom to travel. But the government has been steadily cutting back on cheaper sleeper coaches—while increasing the expensive AC kind. For example,
Sleeper coaches accounted for 73% of all coaches on the Howrah-Chennai Route, in 2009. By 2022, that share had fallen to 56%—and AC coaches had jumped to 44%. But there are far fewer Indians who can afford the luxury of air-conditioned travel. OTOH, there are lengthy waiting lists for sleeper coaches.
This chronic shortage of seats often triggers near-riot situations during festival season—as in this recent stampede in Surat:
The Indian Railways also routinely cancels trains—which creates even more pent-up demand. Just this fiscal year, it has cancelled 62 trains per day.
Adding insult to injury: Cancellation fees. Between April 1 and September 30, the IRCTC auto-cancelled tickets of up to Rs 14.4 million (1.44 crore) waitlisted passengers who didn’t get berth—and earned over Rs 838.5 million (83.85 crore) as cancellation charge.
The Vande Bharat effect: The government has also focused on more buzzworthy projects such as higher speed trains—with upmarket amenities. India now has 25 pairs of Vande Bharat routes—of which 18 were launched just this year. But all that speed and comfort comes at a much higher price:
Vande Bharat trains save 65 minutes on average as compared to the next best train on each route, a Mint analysis showed. The average time saved is about 14% (range of 1-36%), but it comes at a high premium: Vande Bharat fares are higher by an average 52% than the best alternative. On one route (Gandhinagar- Mumbai), you may need to pay 112% more and save just 22% of the travel time.
Adding to this: The government has also cut back on inexpensive, totally unreserved trains called ‘Jan Sadharan’ trains after the pandemic—because they are considered as loss-making services. And many passenger trains were converted into express trains—reducing general coaches while increasing speeds.
Higher price for higher speeds? Maybe not
There is no doubt that India needs faster trains (see: Andy Mukherjee in Bloomberg News). But the irony is that Indian trains are actually getting slower. Times of India found that the average speed for passenger trains declined by more than 5 km/hour this year compared to the last—dropping from 47.6 kmph to 42.3 kmph. The average speed of freight trains fell as well—from 31.7 kmph to 25.8 kmph.
Also this: The definition of “super-fast” has been revised downward over the past decades, as EPW noted back in 2014:
Consider the surcharge levied for traveling by a “superfast” train - seems reasonable on the face of it until one realises that the designation of “superfast” is itself something of a joke. Earlier, a train had to have an average speed of at least 60 km/h to be designated “superfast,” for which excess fare is charged as superfast surcharge. Somewhere in the 1990s, the cut-off speed was brought down to 55 km/h—no doubt to increase the number of trains on which the surcharge could be levied.
As for Vande Bharat: the fastest Vande Bharat train—which connects Delhi to Varanasi—travels at an average 95 kmph. But the target speed for these express trains is actually 2X—pegged at 180 kmph. And the average speed on most routes is below 70 kmph. The reason: We haven’t spent on the infrastructure to enable high speeds. The creator of the trains Sudhanshu Mani says:
So, the promise has not been realised the infrastructure has not kept pace with the train made five years ago. It is not easy to upgrade infrastructure. It needs coordination between many teams, execution contracts, time and money. Money is not a problem, the contract execution to upgrade the tracks is.
Infrastructure has no visibility, trains have. And a lot of it is led by the interest shown by the Prime Minister in launching each and every train. So, the train has become the focus, but work on the infrastructure itself is very gradual.
The bottomline: The occupancy rate for Vande Bharat trains varies wildly—from 21% to 183%. Higher prices may not increase profits—but they have most certainly decreased affordability.
Reading list
Scroll has an excellent and detailed analysis of the Indian Railways’ woes. TS Ninan argues that it needs a better business plan in The Print. This 2014 EPW article on why trains must be accessible is more relevant than ever. Times of India looks at train speeds. Mint looks at the price and speeds of Vande Bharat trains—while Financial Express has more on occupancy. Scroll argues the express trains are impacting the safety and timeliness of other trains. Deccan Herald has a useful interview with the man behind the Vande Bharat project. The Hindu has very good data on the declining number of sleeper coaches. Also worth a read: Our Big Story on the underlying causes for the Balasore tragedy.
