Rail fare hike a difficult but correct decision: Arun Jaitley

New Delhi, 21 June, 2014

Defending the steep hike in rail fare and freight rates as a ‘difficult but correct decision’, Finance Minister Arun Jaitley today said the railways can survive only if users pay for availing of facilities.

“The passenger services have been subsidised by the freight traffic. In recent years, even freight fares have come under pressure,” he said in his first reaction to the 14.2 per cent increase in passenger fares and 6.5 per cent hike in freight rates.

Stating that the choice before the government was to allow the railways to bleed and eventually walk into a debt trap or raise fares, Jaitley said, “India must decide whether it wants a world-class railway or a ramshackled one.

“The railway minister has taken a difficult but a correct decision…The Indian Railways for the last few years have been running at a loss. The only way that Railways can survive is when users pay for the facilities that they avail.”

Jaitley, who will present the Union budget next month, said a loss-making railway would provide below-par services and would eventually not even have the resources to meet its expenditure.

In a Facebook posting titled ‘The Truth of Railway Fare Hike’, the minister said the decision to increase the rates was mooted by the Railway Board on February 5, when the United Progressive Alliance was in power. The board proposed a 5 per cent increase in freight rates and a 10 per cent increase in passenger fares.

The proposal was to rationalise freight rates with effect from April 1 and passenger fares with effect from May 1, he said.

“Even as the Interim Budget of the Railways was yet to come, the date May 1, 2014, was chosen hoping that the general elections would be over by that day. The railways had proposed that this increase would give the railways an additional revenue of Rs 7,900 crore.

“Armed with this decision, the then Railway Minister Shri Mallikarjuna Kharge met the then Prime Minister Shri Manmohan Singh on February 11, 2014. The then Prime Minister approved the hike and suggested that both freight and passenger fares should be implemented with effect from May 1, 2014, itself,” Jaitley said.

BJP leaders term rail fare hike a strong and effective measure

Bharatiya Janata Party leader Mukhtar Abbas Naqvi and Siddharth Nath Singh defended the rail fare hike, calling it a strong and effective measure to counter Congress’ failure.

Naqvi told the news agency, “Correction of the Congress’ failures is the priority,” adding, “The challenges the country is facing is an inheritance passed by the people who are protesting against it.”

He added, “The Modi government was trying to take strong and effective measures. Soon people will realise that measures that are being taken is to rid people of their problems.”

Meanwhile, BJP leader Siddharth Nath Singh said, “Any government faces two choices, to go for the growth or to give doles in the form of vote bank, the decision taken by PM Narendra Modi’s government is to bring India out of the economic mess left by the earlier UPA-II government.”

About the railway hike, he said, “It was a decision that the previous government had already taken in February but they did not announce it because of the upcoming elections and the vote bank consideration and, therefore, left the decision to the new government.”

Clarification by Railways

In connection with the Revision of Passenger Fare and Freight Rates, the Ministry of Railways would like to clarify the following:

The Order of Fare and Freight revision issued by the Ministry of Railways today, as finalised by the previous Government, is only 10 % hike in Passenger Fare and 5 % hike in Freight Rates.

The figure of 14.2 % hike in Passenger Fare and 6.5 % hike in Freight Rates is inclusive of the Fuel Adjustment Component (FAC) (4.2 % for Passenger Fare and 1.5 % Approx. for Freight Rates) which is done once in six months routinely, depending upon the fluctuations in Oil Prices similar to retail prices of Diesel and Petrol at Petrol Bunks. The additional burden due to oil Prices fluctuation, will get reviewed if the price of Oil decreases. It is pertinent to note that the Fuel Adjustment Component (FAC) linked revision has already been implemented twice earlier by the previous government and was last done in October 2013.