Diesel price hike to eat into rail profits

Jan 25, 2013, 07:29 IST | Shashank Rao

Fuel price hike beats the purpose of train fare hikes, as railways will have to foot a bigger diesel tab with the additional gains they had hoped to use for revamping the suburban network

The overhaul that the authorities had in mind for Mumbai’s suburban rail network - cited as the reason to notch up a fare hike - will now be relegated to the sidelines on the back of the diesel price hike. The 50p/l hike announced last Friday, by giving oil retailers the autonomy to rationalise prices every month in small increments, will neutralise any gains the railways hoped to make through the fare hike secured after a decade.

Representation pic

Railway officials were buoyed by the fact that the marginal rise in tariffs - which in Mumbai is 2p/km - would help them activate plans dormant till now owing to a funds crunch. The authorities wanted to divert the additional Rs 6,600 crore revenue earned through the ticket fee hike towards expanding rail lines, developing infrastructure, sprucing up passenger amenities, building new foot over bridges, levelling platforms, erecting new ticket windows and finishing pending projects among other things.

But the diesel price hike has stymied these plans, because 40% of the extra returns will be guzzled up by the fuel used for thousands of locomotives/engines every day. In the bargain, the development work on the Mumbai suburban rail network - lifeline for 70 lakh commuters in the metropolitan - will also be affected.

A Rs 2,700-crore dip
The railways consumes about 2,500 million litres of diesel per annum to run its fleet of 4,500 diesel locomotives, hauling both freight and passenger trains. Last fiscal, it paid about Rs 10,000 crore for the fuel. The diesel price hike would force it to shell out an additional Rs 10 per litre.

“We expect to lose around Rs 2,700 crore of the additional revenue due to hike in diesel prices. This automatically reduces our extra revenue to Rs 3,800 crore, which is just a drop to cover the losses,” said a senior railway official.

Officials said the railways have to offset around Rs 25,000 crore, which is currently cross-subsidised for passenger train operations by revenues earned from freight trains. There are many railway stations on central and western railways where minor works - repairing automatic ticket vending machines, cleaning toilets, installing lights and fans at platforms among other amenities - are a crying need. Funding of multi-crore projects like the Churchgate-Virar elevated corridor, CST-Panvel fast line, two new railway lines, and new terminuses were also dependent on the fare hike.

“The fare hike wouldn’t have brought immediate relief but in the long run it would have helped in funding high-budget projects to some extent. With the diesel price hike, our variable costs will also go up,” said a railway official involved in planning projects.

Did you know?
The railways consumes about 2,500 million litres of diesel per annum to run its fleet of 4,500 diesel locomotives 

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