Call it the nation’s economic lifeline or the ‘people mover’ transporting millions in a fast, safe and economic way, Indian Railways is basically a transport utility whose unit of business is a ‘train load’.

The rail infrastructure, in particular track, signalling, stations, locomotives and operating staff, does not differentiate between a 24-coach super fast train carrying 1,500 passengers and a 54 BOXN rake carrying 4,500 tonnes of coal. For the rail infrastructure, each is a train occupying valuable section capacity, although the earnings of and the end use for each may be different.

However, leaving aside the finer aspects of accounting — such as providing for the depreciation reserve fund and contributing to the Central exchequer — a rough calculation would yield some interesting facts on the comparative economics of passenger and freight businesses.

The Indian Railways’s total expenditure in 2008-09 was about Rs 64,839 crore. During this period, it earned Rs 53,434 crore from freight trains and Rs 21,931 crore from passenger trains. The contrast cannot escape the notice of the most easy-going financier.

However, populism being the the need of the hour, successive railways ministers have kept adding passenger trains over the last decade. Political compulsions have also kept the passenger tariff practically at the same level for last eight years. As a result, the railways loses Rs 20,000 crore in the passenger fare segment annually. To make up for this loss, earnings from freight traffic are used to cross-subsidize the passenger business.

Railway Board mandarins are apparently flexing their muscles to introduce a token 8 to 10 per cent hike across the board, including suburban services, lest the finance ministry insists on having its way and levies the 10 per cent service tax on all rail tickets .

This could be a mid-term hike, which is actually a rationalization of fares taking into consideration the increase in the wholesale price index over the years. It is a prerogative of the Railway Board which has not been exercised on passenger fares for quite some time. Parliamentary approval may be needed for the rail budget, but not for a mid-term hike, which has been routinely done in the past for freight tariff.

There appears to be a pressing need to increase fares as the railways’s ‘investable surplus’ over the years has declined sharply, affecting its capability to take up new projects and making it heavily dependent on market borrowings. In addition, the sixth pay commission will involve an extra burden of Rs 74,000 crore in arrears.

The last time fares were raised was in 2002-03, when the minimum fare for second-class mail and express trains went up by just a rupee. During his tenure, Lalu Prasad went a step further and reduced passenger fares marginally for three consecutive years.

Interestingly, according to a recent report in a daily in the United Kingdom, a return journey by first class on a train from Newquay in Cornwall to the Kyle of Lochalsh in the Scottish Highlands 1,360 km away is about $1,750 or Rs 75,000. A somewhat equivalent journey on AC first class from Delhi to Mumbai by the Rajdhani Express would cost less than Rs 7,000 and less than Rs 1,000, if one chooses to take the Garib Rath. Significantly, train speeds or quality of service on the British railways is nothing much to talk about either.