The government on Friday pushed through a steep hike in rail passenger and freight fares, in the first dose of a "bitter medicine" Prime Minister Narendra Modi has warned of having to administer to revive Asia's third-largest economy.
From June 25, rail passenger fares will increase by 14.2 per cent and freight rates by 6.5 per cent, the Railways Ministry said in a statement. The last fare hike was in October 2013.
Mr Modi had prepared the ground last weekend when he had warned that tough measures are required to revive the ailing economy.
The fare hikes announced on Friday come ahead of the Rail Budget 2014 to be presented by current Railway Minister Sadananda Gowda next month.
The decision of the Railways to hike fares restores an announcement of May 16, when the same hike was declared but immediately rolled back. The May 16 fare hike decision had raised eyebrows as it came in the midst of Lok Sabha election results. The then Railway Minister Mallikarjun Kharge came out with a statement directing the Railway Board to leave the decision on the hike to the new government.
Currently, the Railways is facing severe financial crunch with subsidy on passenger fares touching Rs 26,000 crore. The national transporter needs a huge investment to upgrade its signalling system and strengthening the track to prevent accidents. Railways Minister Sadananda Gowda has said the government is short of resources and some resource mobilisation should be taken as a priority.
Modernisation and revamping of Railways is the top infrastructure agenda of the government, which wants to build a Diamond Quadrilateral project of high-speed trains and a network of freight corridors over the next few years. These projects require very large capital investments.
Mr Gowda had earlier said the government is planning to allow foreign direct investment (FDI) into Railways to finance its ambitious plans to modernise the sector. At present, there is a complete ban on any kind of FDI in Railways except mass rapid transport systems.
The Commerce and Industry Ministry has reportedly started the exercise to relax foreign investment norms in the Railways by permitting 100 per cent FDI in high-speed train systems and dedicated freight lines.
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