The first spoon of the bitter medicine that Prime Minister Narendra Modi had spoken about has been administered to rejuvenate the Indian economy. In an unpopular move, which has drawn biting criticism from the opposition, the government has hiked rail passenger fares by 14.2% and freight charges by 6.5%, to be effective from June 25, 2014. The increased fares will fluctuate slightly and depend on changes in fuel prices.
Finance Minister Arun Jaitley has, however, vigorously defended the steep hike in rail fare and freight rates as a “difficult but correct decision.” “The passenger services have been subsidized by the freight traffic. In recent years, even freight fares have come under pressure,” he said June 21, a day after the rail free hike.
Speaking about hard choices before the country, Jaitley said: “India must decide whether it wants a world-class railway or a ramshackled one.”
“The railway minister has taken a difficult but a correct decision…The Indian railways for the last few years have been running at a loss. The only way that railways can survive is when users pay for the facilities that they avail,” Jailtey said.
The argument hasn’t cut ice with the opposition. Terming it the steepest hike in history, the opposition has predictably slammed the government’s decision, saying that it bypasses the parliament as it is not introduced in the railway budget. They charged that an increase in freight rates will lead to increase in prices of essential commodities which are transported by rail across the country.
The Communist Party of India-Marxist termed it as a “cruel blow” to the people of the country who were looking at some relief from “price hikes in the years of Congress misrule”. Former Railways Minister Lalu Prasad Yadav and Tamil Nadu Chief Minister Jayalalithaa reacted strongly to the fare hike. She appealed to the prime minister to look for other avenues to increase the revenue for railways instead of raising passenger fares.
“I have merely withdrawn the earlier government’s decision to withhold the fare revision on May 16,” Union Minister for Railways Sadanand Gowda said.
The previous UPA government had deferred a decision to hike fares in view of its potential political costs, leaving the difficult decision to its successor.
The fare hike has, however, been hailed by economists as a much-needed booster for Indian Railways, which, according to an estimate, has been recording losses to the tune of around Rs 900 crore (150 million USD) every month in the passenger segment. India’s cash-strapped railway sector is looking at raising an additional Rs 8000 crore (around 1.3 billion USD) this financial year.
Many sectors, including cement, steel, power and coal, will be impacted by the hike in rail fares, but the markets may see it in a positive light with the government’s plan to move ahead swiftly with reforms to revitalize the economy.
The government is also planning to open up parts of the rail network to foreign investors to revamp and modernize it.
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