Railways might witness a fall in passenger volumes

Assured volumes in passenger numbers for Indian Railways might turn into history. For the first time in many years, the mega transporter is likely to record a decline in these volumes in the current financial year ending March 2015.

The new trend, which experts term “interesting but not alarming”, is a result of continued shift by passengers from rail to other modes of travel, thanks to improvement in road connectivity and the shrinking differential in high-end rail and low-end air travel.

Passenger volumes had grown at rates between two per cent and seven  per cent in the past few years. The growth dipped to a mere 0.6 per cent in the last financial year. The total number of passengers booked by Indian Railways was 8,471 million in FY14, compared to 8,420 million in the previous year. In the first six months of the current financial year (FY15), the railways booked 4,253 million passengers, around two million less than the 4,255 million during the corresponding period of FY14.

“The Railways had been losing freight volumes to roads for many years. The data indicate the shift has now started gripping the passenger segment also,” said Amrit Pandurangi, infrastructure expert and senior director at consultancy firm Deloitte.

“This is interesting, particularly given the indicators of overall economic growth of the country, which should ideally have translated into improved passenger traffic growth for the railways,”

he added.

Passenger traffic accounted for 27 per cent (Rs 37,500 crore) of Indian Railways’ gross traffic receipts or total earnings of Rs 140,000 crore (Rs 1,400 billion) in FY14. The transporter had a loss of Rs 26,000 crore (Rs 260 billion) in the segment, even as fares have been raised twice in the past year. They were raised by 14 per cent in June, immediately after the new government assumed power. Before that, fares were increased in October 2013.

According to Pandurangi, the new trend might not aggravate Railways’ financial ills if the flight of passengers happens in the categories in the lower end of passenger segment, where subsidised fares is a cause of worry. “Railways does not make money on the passenger segment as a whole. The trend should be bad financially only if it is restricted to higher end of passenger segment,” he said.

Data show the flight of passengers is restricted to the non-suburban segment, which accounts for 46 per cent of volume of passengers but 93 per cent of passenger earnings. This indicates why the Railway Board, which manages the mammoth network, should not ignore the new trend, experts say. Total passengers booked in the suburban category grew 1.65 per cent to 2,310 million the first half of the current financial year, compared to a decline of 2.02 per cent to 1,942 million in the non-suburban category.