Tuesday, May 20, 2014

Fare hike may be Rail Minister’s first stop as fuel bill soars

Mamuni Das

The Railways may have backtracked on its decision to increase fares, but the next Minister from the BJP-led Government will have to deal with a sharp jump in fuel costs.
The total fuel cost for the Railways shot up 28 per cent to ₹28,471 crore in 2013-14 against ₹22,282 crore in the previous fiscal, according to revised estimates.
Of this, only the rise in costs till July 2013 (the first four months of the last fiscal) was factored in the fare hike of October last year.
So, as on date, 10 months of fuel price hike has not been factored in the fares. The Railways had put in place a fuel adjustment cost mechanism, which allows increases in both freight and passenger tariffs in sync with hikes in fuel cost. But the Railways were refrained from increasing freight and passenger fares as there were general elections.
Freight increases have an inflationary effect, while passenger fare increases are usually resisted by politicians. The Railways transport over 2 crore people and 2.9 million tonnes of cargo everyday.
Fuel increase break-up
The total fuel increase was contributed by a 37 per cent hike in the diesel bill and a 12.5 per cent rise in electricity costs in 2013-14.
Of the total increase of ₹5,125 crore in the fuel bill, almost 77 per cent (₹3,945 crore) was due to high diesel prices.
Of the total increase in the electricity bill, 5 per cent was due to a rise in electricity charges, and another 6 per cent was because of higher traffic movement, said an official.
From the 65,000 route km network, the Railways have electrified 37 per cent of routes. Every year 1,300 km of network is electrified now. Electricity traction, while accounting for 34 per cent of the fuel bill, moves 65 per cent of freight and 51 per cent of passenger traffic.
Energy-based divides
Debates on changing the energy usage mix of Indian Railways usually evoke strong emotions among railway officials of two departments – electrical and mechanical.
While officials from the electrical department support more electrification of the network citing the bloating costs of diesel, those from the mechanical department feel there is a strong “electric lobby” comprising electric equipment manufacturers who push for electrification.
Mechanical officers say the real costs of electrification are under-estimated and that from a country perspective, the Railways should use more of diesel as trains are one of the most energy-efficient users of diesel for the country.
However, the electrical officers cite the slow pace of electrification despite the increase in fuel costs to point out that the “diesel lobby is very active in preventing something that should be an economically rational move.”
(This article was published on May 19, 2014)

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