The Central government’s decision to waive service charges on booking of railway tickets online is likely to severely impact the…
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The Central government’s decision to waive service charges on booking of railway tickets online is likely to severely impact the revenues of the Indian Railway Catering and Tourism Corporation (IRCTC) and it may force the government to derail its plans for listing it on the stock market.
The government waived the service charges on online bookings following demonetisation to encourage cashless transactions. However, more than 40 per cent of the revenues generated by IRCTC comes from booking tickets from its website where it charges a nominal fee.
During 2015-16, IRCTC posted revenue of Rs.1,500 crore, of which around Rs.550 crore came from ticket booking. IRCTC used to charge Rs.40 per ticket for bookings in air-conditioned classes and Rs.20 per ticket in sleeper class. Moreover, the commission IRCTC makes from ticket booking cross-subsidises its loss-making ventures such as catering services. IRCTC shares half of this service charge revenue with the railways.
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The Railway Ministry has already written to the Finance Ministry seeking reimbursement of the loss amounting to over Rs.500 crore on an annualised basis.
Although the government is in the process of its listing, the concerns of its revenue stream is a major hindrance for future cash flows pointed out by various stock market analysts. The other segments such as licence catering, Rail Neer (packaged drinking water) and tourism generates very thin margins.
Finance Minister Arun Jaitley during his budget speech had said railways will offer competitive ticket booking facility to the public at large. The government will list shares of railway public sector enterprises such as IRCTC, Indian Railway Finance Corporation and Ircon International.
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