New Delhi: Terming the rail passenger fare and freight hike "inevitable", experts today said it will have some impact on price rise as it will increase transportation cost.
"I think government had to bite the bullet and need to take hard decisions. It was inevitable. It will raise the cost of transportation. But I think it will ensure viability of railway finance," said D K Joshi, Chief Economist, Crisil.
However, Joshi said the fare hike will also push the inflation a little.
The cash-strapped railways increased across-the-board passenger fares by 14.2 per cent and freight by 6.5 per cent to garner Rs 8,000 crore a year. The new rates would come to effect from June 25.
The inflation based on wholesale price index (WPI) rose to five-month high of 6.01 per cent in May, mainly on account of higher food prices.
Commenting on the decision, former Chairman, Commission for Agricultural Costs and Prices (CACP), Ashok Gulati said: "Government is bold enough to bite the bullet and this signals that government is trying to control subsidies and pricing services."
"I hope this will improve the services and prices will come down in real term going forward," Gulati added. Industry body Assocham President Rana Kapoor said the decision to increase fare was inevitable but was bold.
"The central government`s decision to increase the railway fares by 14.2 per cent is an inevitable but bold decision. Corrective measures are necessary to address the severe financial crunch facing the Indian Railways, a result of a decade of decadence.
"As promised, the Prime Minister is taking all due measures towards his vision of a `Shresht Bharat`, amidst some calibrated tough measures. This is a precursor to a prudent Railways Budget," Kapoor said.
Abhaya Agarwal, Partner, Infrastructure Practice, EY said the fare hike was inevitable as there was a cumulative deficit in Railways for many years.
"Freight hike is very modest. If Railways wants to ensure safety, modernisation and other passenger amenities, it needs to have surplus funds or else it is very unsafe," Agarwal said.
However, it will add up the pressure on passenger a little, he said. "It is a welcome step. Going forward the unit cost of freight needs to be reduced than to raise fares," Agarwal added.