Hike as per Planning commission recommendations

The Narendra Modi government has gone and done what previous governments shied away from: hiking railway passenger and freight rates as per Planning Commission recommendations. This is one of the tough measures that Modi warned the people to be prepared for.

Political pundits are surprised that Modi chose to announce the hikes just weeks before the railway and general budgets.

Passenger fares have been hiked by 14.2% and freight rates by 6.5% with immediate effect. The railway hopes to increase revenue by at least Rs 8,000 crore with these hikes.

Railway minister Sadanand Gowda justified the fare and freight rate hike, saying: "I was forced to do this to cover the huge losses. NDA is just pushing what the UPA wanted to do but didn't. We did it."

Twenty million Indians use the railways every day. Fare hikes are across classes. Not just AC-class, even sleeper class fares see a 14.2% increase.

Railways has been making a loss of Rs 900 crore per month in the passenger segment and this was worrying the railways. Railways minister Sadanand Gowda said he will seek enhanced budgetary support to get over the funds crunch.

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"The logic is simple: The majority of trains have 18-24 sleeper class compartments with only 3-5 AC coaches. To mop up the losses, all fares had to be increased," said a source. But the passenger has been forced to count his losses from day one.

The Modi government will also put a freeze on announcing anymore railway projects, sources said. Railway projects have been used by a series of railway ministers as a political tool. Many of these projects remain on paper even years after they are announced. "It will take at least 10 years to get all the projects completed," said a railways official. Simultaneously, senior railway officials have been told to perform or perish, think out of the box and forget about hierarchy.

Railway minister Sadanand Gowda met 270 top railway officials, including 70 divisional railway managers, and read them the riot act. No more excuses, he told them, asking them to be assertive and honest to their work. He told them not to be "roundabout" but come "straight to the point"; that he was available for consultation 24/7. The meeting was held in the Railway Museum.

Friday's hike — 14.2% in passenger fares and 6.5% in freight rates — is exactly the same as was announced by the outgoing UPA government in May, soon after polling in the general elections ended. But it withdrew the hike within hours, saying that the decision has been left to the next government.

The last time fares were hiked was in January 2013, when passenger fares were increased by 21%, the first time in a decade.

Interestingly, Friday's fare and freight rate hikes come just weeks before the railways and general budgets are to be presented. No less interesting is that on March 7, 2012 Modi, who was then Gujarat CM, had tweeted: "just before railway budget UPA has suddenly increased railway freight rates bypassing parliament. Wrote to PM against this."

"Fact is Modi had no other option but to increase fares if he wants to save the railways. The Planning Commission's recommendations are clear on that. Lalu ignored them. Dinesh Trivedi announced hikes but was summarily shunted out after Mamata Banerjee cried foul. Bansal was hardly bothered. Kharge couldn't do a thing," said a highly-placed plan panel source.

Things started unfolding after Gowda and his MoS Manoj Sinha met finance minister Arun Jaitley a couple of days ago. "I will be meeting the PM shortly and a decision will be taken on fare hikes," he said after the meeting.

Gowda said railways will seek more budgetary support, that funds were required for finishing the many national projects left on hold. In the interim budget, the railways had got Rs 29,000 from the Centre as budgetary support. The railway minister said he has written to all chief ministers to make their states partners in undertaking and finishing railway projects, spend 50% of the cost of a project and give land for it.