Train tickets may get costlier as Railways rethinks service charge waiver

Train tickets may get costlier as Railways rethinks service charge waiver

Amid IRCTC's Rs 500-cr loss, Railways is learnt to have initiated talks with the finance ministry

Hit by mounting losses, state-run Indian Railway Catering and Tourism Corporation (IRCTC) and Indian Railways are pushing for a partial rollback of the service charges waiver given on train tickets earlier to boost digital transactions after the government's demonetisation move. According to sources, Indian Railways has already initiated talks with the finance ministry over this. 

On November 23 last year, the government had waived the service charge, while a free insurance scheme was also implemented on December 9. An annual waiver of service charge will lead to a loss of about Rs 500 crore on the revenue of IRCTC, while the company is likely to suffer an additional outgo of Rs 36-40 crore, if free insurance scheme is extended annually. The ministry of railways has written several letters to the finance ministry to compensate for these losses.

On March 31, the Narendra Modi government had extended these digital sops till June 30. “We are now pushing even harder for compensation from finance ministry. If the finance ministry again wants to extend the scheme after June 30, we are telling that at least some part of IRCTC’s revenue should be restored. That means at least 70 per cent of the previous service charge,” said an official source close to the development.  

Before the offer was rolled out, IRCTC used to charge Rs 40 per ticket for bookings in air-conditioned classes and Rs 20 per ticket in sleeper class. For IRCTC, this has been a major revenue source, as the company posted Rs 551 crore in income from railway ticketing in 2015-16, up from Rs 256 crore in 2014-15. Out of its monthly share on service charge, 50 per cent used to go to the railways’ kitty. This comes at a time when IRCTC is one among the 11 state-run companies, in which the government wants to sell its shares this fiscal.

In order to minimize its losses the company has now started seeking from banks a higher security deposit and also half of their transaction fees to minimize its losses.  As per the new policy by IRCTC, new banks which want to integrate with it for payment gateways should pay Rs 20 lakh as security deposit, while existing banks should pay Rs 10 lakh.  This has led to a tiff between the company and the banks. “We have asked the ministry to intervene in this matter or to take it up with banks,” said an IRCTC official, in terms of anonymity.

Interestingly, IRCTC through its website and mobile app has now introduced pay-on-delivery as one of the payment options for its customers. Delivering tickets at the consumer’s doorstep by offering the pay-on-delivery option will facilitate those consumers who book through travel agents to move to online medium. The service will be available in more than 600 cities covering more than 4000 pin codes and would be initially available five days before the departure date. The customer will have to do a one time registration for availing PoD as a payment option. Customer will have to tender either AADHAAR or PANCARD to avail this payment option. Payment on Delivery Charges shall be Rs.90 for transaction up to Rs 5,000 and Rs 120 for transactions valuing more than Rs 5,000.

POINTERS

1. An annual waiver of service charge will lead to a loss of about Rs 500 crore on the revenue of IRCTC

2. The company is likely to suffer an additional outgo of Rs 36-40 crore, if free insurance scheme is extended annually.

3. IRCTC used to charge Rs 40 per ticket for bookings in air-conditioned classes and Rs 20 per ticket in sleeper class.

4.  The company had posted Rs 551 crore in income from railway ticketing in 2015-16, up from Rs 256 crore in 2014-15.

Source:Business Standard