Whose benefit anyway?

Indian railway budget has been long used for fulfilling political promises, every year government announces new trains and new tracks without considering the financial feasibility. After ages Naredra Modi government announced a railway budget, which actually addresses the operational challenges of railways. The theme of FY 2015-16 budget was centered on improving the operational efficiency, passenger experience and increasing private-public investments.

The government has announced that the passengers can now book tickets 120 days before the date of Journey. The announcement has been a good news for few, who plans their travel in advance and it is irrelevant for someone like me, who plans journey hours before the departure. There is only one clear winner – ‘Indian Railway’. The Advance booking facility has been long used as working capital financing by Airline industry, which is ready to offer hefty discounts for the same. On the other side, the Indian railway does not provide any discounts owing to the fact that it does not have any close competitor.

Indian railway’s top line stood near INR 160,000 Cr for FY 2014-15, the passenger segment contributed just 27% and Goods earnings fetch remaining 73%. Reserved passenger segment fetches nearly INR 12,800 Cr, nearly 8% of the topline. Now to ‘Guesstimate’ advance amount collected by Railway, one needs to estimate the average advance booking. The demand of railway tickets on peak dates can be understood from the fact that confirmed tickets for 29^th August (Rakhi-Celebration) is not available since 10^th May 2015. To understand the advance booking status for a normal day, I have considered journey from Mumbai to Gwalior. In Mangala Lakshadweep Express no confirmed tickets are available for next 80 days (more than two and half month) for 81-120 seats are on an average 50% booked.

If we extrapolate this observation to whole reserved segment even by conservative estimates seats are fully booked for 60 days and for 61-120 day period the seats are on an average 40% booked. As per these estimates railway would have collected nearly advance of INR 2986 Cr (12800*60/120 + 12800*60*0.4/120)/3 Hence at any given day, railway has advance ticket deposit of 2986 Cr. The Railway would have been earning nearly 8% return on this fund, which lead to an earning of nearly INR 66 Lac per day.

Interestingly the Railway would be earning far more than INR 66 Lac per day via advance booking system. As railway issue nearly 30% more ticket than actual capacity under waiting system. Though railway refunds the amount in case of ticket does not get confirmed, but it surely earns interest on the same!

Source: Official Railway Budget  & IRCTC