Cabinet approves rail tariff authority for fares

According to the sources, the Rail Tariff Authority will decide freight rates and passenger fares for the national transporter.

New Delhi: A proposal to set up Rail Tariff Authority (RTA) for fare rationalisation got in-principle approval from the Union Cabinet Thursday but the final nod was deferred for want of clarifications on various aspects like powers of the new body.

The Cabinet deliberated upon the proposal to establish the first-of-its-kind body that will suggest the level of tariff for both the freight and passenger fares from time to time taking into account the input cost (diesel and electricity) and volatile market conditions.

However, some members of the Cabinet sought clarifications from the Railways Ministry on some aspects like the composition and powers that the proposed RTA will have, sources said.

While in-principle approval was given for setting up the body, the final nod was withheld till the Railways Ministry provides with the clarifications, the sources said.

The RTA, mooted by former Railway Minister and Trinamool Congress MP Dinesh Trivedi in his Rail Budget 2012-13, was pursued by his successors CP Joshi, Pawan Kumar Bansal and the present occupant Mallikarjun Kharge.

The need for setting up such an authority, which is intended to be immune from political interference, has been felt because of rise in cost of running trains and the need to insulate the Railways from hikes in fuel and electricity and eliminating uncertainties in tariff formulation.

The cross subsidisation for passenger service had gone up to Rs 36,000 cr in 2012 which was reduced to Rs 32,000 cr after the latest hike in passenger fares and cancellation charges.

In 1950 railways was earning 47 percent of its revenue from passengers which has been gone down to 27 percent now. Freight earnings account for 67 percent at present at present.

Railways had moved the proposal for setting up Rail Tariff Authority to different ministries including Finance seeking their views on the authority before submitting it to the Cabinet for approval.

PMO was also constantly pushing the proposal for setting up of the RTA.

Currently railways have fuel adjustment component (FAC) policy which is linked with energy and fuel prices and calculated accordingly. FAC is slated to be reviewed for both freight and passenger fares in every six month.

While the freight has gone up by about 5.7 percent from April 1 due to the linking of FAC in the freight tariff, Railways will examine its applicability in the passenger services in October.

In fiscal 2013-14, the deregulation of diesel prices for bulk users, such as Railways, will add Rs 5,100 crore to the public transporter's costs. The Railways will absorb the Rs 850 crore rise in passenger costs on this account.