Given how the losses on passenger services has risen from Rs 4,955 crore in FY02 to R24,600 crore in FY13, the idea of putting in a railways regulator was long overdue. With around 40-45% of passenger costs not getting recovered, this was cross-subsidised by keeping freight rates high—in FY07, around 43% of profits on freight were enough to take care of passenger subsidies; by FY11, this rose to 102%. As a result, India’s passenger tariffs are around a third of China’s while its freight rates are around 70% higher. Since this makes industry uncompetitive, over a period of time, the railways share of freight is falling, leaving less to even subsidise passenger tariffs anymore.
Which is why the Cabinet has done well to give the proposed Rail Tariff Authority some teeth and saying that the Railway Board will “ordinarily accept its recommendations”, and in case there is a difference of opinion, this will once again be sent back to the RTA. The problem, however, is that this needs to be legislated since, under the Railway Act, the Board is the only authority that can set rates. So, there can be some more slips between the cup and the lip.