Process to form Rail Tariff Authority gathers pace

According to sources, Railways has finalised the contour of the RTA and it is likely to be a five-member body headed by its chairman.

Updated: Jun 30, 2013, 11:23 AM IST

New Delhi: Aiming to delink its financial health from politics, Railways has expedited the process for setting up a Rail Tariff Authority (RTA) and sought the views of other ministries before submitting the proposal to the Cabinet for approval.

According to sources, Railways has finalised the contour of the RTA and it is likely to be a five-member body headed by its chairman.

While a retired Railway Board member is being tipped to head the regulatory body, four other members from outside of Railways are being shortlisted.

"The cost of running trains is becoming higher and the aim is to insulate the Railways from various hikes like fuel hike and eliminate uncertainties in tariff formulation," a source said.

There is a policy now and the fuel adjustment component (FAC) is linked with energy and fuel prices and calculated accordingly.

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.

FAC is slated to be reviewed for both freight and passenger fares and by that time the RTA is expected to be constituted, the sources said.

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. The RTA, a regulatory body which is the first-of-its-kind for Railways, 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.

The issue of RTA was discussed in a meeting held by Prime Minister Manmohan Singh with Railway Minister Mallikarjun Kharge along with Chairman Railway Board Vinay Mittal and Planning Commission Deputy Chairman Montek Singh Ahluwalia recently.

"It was decided at the meeting that the process for setting up RTA will be accelerated and brought to Cabinet soon," the source said.

"The Railways is floating a note which is very important to set up a tariff regulatory authority. They have circulated the note, we have seen it. And we hope this will also come quickly in the Cabinet to get approved," Ahluwalia had said after the meeting.

Railways, which had seen its operating ratio (a measure of efficiency) worsen to 95.3 percent in 2009-10 when Mamata Banerjee was Railway Minister, has clawed back some ground. Following the recent increase in passenger fares, it hopes to end 2013-14 with an operating ratio of 87.8 percent.

In the light of deregulation of the HSD oil, Railways' finances need to be rationally insulated, and to this end a mechanism to neutralise the impact of fuel prices on operating expenses is required to be put in place.