The announcement came before the budget session of the parliament. The timing shows that the government is finally becoming serious about setting right our domestic fiscal situation.
The Railway budget, tabled in the Feb-May session, was separated from the Union Budget in 1921 following the recommendations of the Acworth committee. The primary reasons were to encourage a business oriented approach to the railways, and to allow it to finance its own development.
Indian Railways has been operating on losses over passenger operations. This was to be compensated by cross-subsidisation through hikes in freight rates. However, competition from other modes of transport made the freight rates unviable.
Coalition Politics: There were attempts to hike rates in the last budget, however it was not possible due to coalition pressures from the TMC. After the TMC withdrawal the Railways Ministry went to the Congress and it became possible to revise the rates according to the needs of the hour.
The Finance Minister called it a “sound economic decision”.
Nomura comments: “Over the past few years, consumers have remained immune from rising inflation as prices (of fuel, railway fares, fertilizer, electricity) have been kept artificially suppressed. This kept inflation suppressed, fuelled consumption, and led to an unbalanced economy, with the burden of these imbalances falling on private investment,” it said.
Tariff Body: A Railway Tariff Authority has been proposed to depoliticize passenger fares. The objective is to put fares in the domain of business imperatives. To be effective, such a body must be independent and it should work transparently.
Fresh income would allow greater investment in passenger safety and sanitary facilities.