Rail freight, passenger fares may be increased - Livemint

New Delhi: Indian Railways will consider increasing freight and passenger fares to make up for rising fuel costs, and is keen on getting foreign direct investment (FDI) for railway infrastructure projects, railway minister Mallikarjun Kharge said on Thursday.

"FDI is welcome in infrastructure projects such as elevated rail corridor in Mumbai, high speed trains and dedicated freight corridor," he said at a CII international railway conference in New Delhi. "FDI is already open for factories in rolling stock such as locomotives and coaches." The ministry is considering 100% FDI in railway infrastructure.

On raising fares, Kharge said, "We are examining how to do it." The fuel adjustment component (FAC) in railway fares was to be revised by September end, "but we have not lost much time, so will definitely examine", he added.

The Railway budget for 2013-14 linked rail fares with a separate fuel component called Fuel Adjustment Component that was proposed to be revised twice a year to reflect changes in fuel cost. Any change in FAC would mean an increase or decrease in rail fares.

Fuel costs have gone up for electric trains by 16% and diesel trains by 7% since 1 April, said Arunendra Kumar, chairman, Railway Board.

Indian Railways last raised freight rates on 1 April by 4-8 paise per kg across commodities including coal, cement and iron ore. Passenger fares were increased in January by 2-10 paise per km across classes.

Fuel costs constitute 15-20% of railways' total expenditure.

"Railways has imposed a 15% busy season surcharge on freight, so freight tariffs have already gone up," said Abhaya Agarwal, a partner at EY Llp, who oversees the infrastructure practice at the consulting firm in India. "Railways should try to improve its operating ratio and maintain the freight rate. With the manufacturing economy not doing good, companies will have to absorb the increase in tariffs. Passenger fares, however, need further revision."

The railways has imposed a 15% busy-season surcharge effective 1 October on freight rates, higher than the 10-12% rate levied last year.

The busy-season surcharge will be applicable till 30 June and is imposed seasonally every year.

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