What’s Really Happened to Rail Fares in the Last Nine Years

The annual presentation of the Railway Budget in Parliament is a staid affair usually featuring the minister in charge reeling off a list of new lines to be built or stations to be refurbished. For the last nine years, no minister has dared to announce an increase in ticket prices, though they have often raised the cost of transporting freight.
Dinesh Trivedi, the current railways minister who may not be in that position for much longer, tried something different on Wednesday when he announced increases in prices ranging from 2 paise per kilometer traveled to 30 paise per kilometer. That works out to about to between 4 U.S. cents and 60 cents more per 100 kilometers, or 62 miles.
Almost immediately, Mamata Banerjee, the former railway minister and the leader of Mr. Trivedi’s party, the Trinamool Congress, announced that the fare increase was unacceptable and had to be rolled back. She also demanded that the government fire Mr. Trivedi, whom she handpicked to run the ministry just a few months ago.
Ms. Banerjee and her party have been very clear time and again, that they will not countenance any increase in rail fares, so her reaction is frankly not surprising. What is perhaps more surprising is that Mr. Trivedi even tried to raise fares, a decision he has justified as being good for the country in various interviews.
But is the increase that Mr. Trivedi proposed really an increase? It’s true that he has proposed a nominal increase in the cost of train travel, but let us consider his proposal in real terms, or in other words, adjusted for inflation.
The average railway fare in India was 26.3 paise per kilometer in the fiscal year 2010-11, according to the Finance Ministry’s Economic Survey report released on Thursday. At the low end of the range, Mr. Trivedi’s proposal increases fares by 7.6 percent – that is almost the same as the 7.6 percent increase in India’s latest consumer price index, in January, compared to a year earlier.
O.K., now put that comparison aside and take a look at how much costs have increased in the past nine years – the period over which there has been no increase in railway ticket prices.
India’s consumer price index for industrial workers, which goes back decades, is the best available measure of how costs have changed in that time. According to that, consumer prices have increased 87 percent from early 2003 to December 2011. Even at the high end of Mr. Trivedi’s proposal, which would apply to fares for air-conditioned cars, for which prices are already substantially higher than the cost of traveling in sleeper cars, the increases do not come close to matching the general increase in costs.
What the numbers show is that it’s incorrect to say that ticket prices have remain unchanged in the past nine years. Adjusted for inflation – which is the best way to measure prices – rail ticket prices have actually fallen about 48 percent in the past nine years as the average price of everything else has gone up.
But I suppose Ms. Banerjee will not see it that way.