Rail fare, LPG price hike: Is Modi govt signalling tough economic decisions in 2020?
Talk Point

Rail fare, LPG price hike: Is Modi govt signalling tough economic decisions in 2020?

The Indian Railways announced Tuesday a hike in fares across its network for the first time since 2014-2015.

   

Illustration by Soham Sen | ThePrint

The Indian Railways announced Tuesday a hike in fares across its network for the first time since 2014-2015. The price of non-suburban fares has been increased by Rs 1 paise per km with effect from 1 January. Additionally, the LPG price has gone up by Rs 19 per cylinder and will also be effective from 1 January.

ThePrint asks: Rail fare, LPG price hike: Is Modi govt signalling tough economic decisions in 2020?


Tough times call for tough economic measures. Some of these decisions will be non-populist

Radhika Pandey
Fellow, National Institute of Public Finance and Policy

The Indian Railways has announced a marginal hike in fares with effect from 1 January, 2020. The railways has been a classic case of cross-subsidisation of passenger fares by freight rates. While some amount of fare hike is justified to improve amenities for passengers, policy preference for subsidies needs to gradually end to create space for more productive expenditure.

The Modi government also announced an increase in the price of non-subsidised LPG cylinders by Rs 19. These decisions need to be seen in light of the government’s precarious fiscal situation. In the midst of a protracted economic slowdown where the government is expected to do the heavy lifting as far as spending is concerned, some amount of expenditure rationalisation should be accepted.

Government’s fiscal deficit has risen to 115 per cent of the target in the first eight months of FY20 primarily on account of lower-than-anticipated revenue receipts. Attempts are being made in every possible way to achieve the budgeted fiscal deficit. The expenditure in the last quarter by all ministries has been capped at 25 per cent of the budget estimate.

Tough times call for tough economic measures. Some of these decisions will be non-populist, but they have to be taken to restrict the adverse implications of fiscal slippage.

Views are personal.


Modi govt’s latest price hikes are ill-thought decisions, not tough ones

Praveen Jha
Professor, Centre for Economic Studies and Planning, JNU 

The answer to the question of whether one should call the Modi government’s price hike decision tough or foolish is a pretty straightforward one. It is quite clear that in terms of acquiring more resources, the government is taking measures that will be counterproductive. Such decisions are going to have an adverse impact on large segments of the masses and will have a bearing on their demands.

One would not think of the latest price hikes as tough economic decisions, rather they are ill-thought decisions. I believe that these are undesirable decisions that are likely to boomerang. What remains to be seen is how or whether this will fructify in the long run. Speaking of a five-year plan, the question of where the resources will come from remains unanswered. Only grand announcements have been made so far as is often done by the Modi government, but a blueprint of the same has not been unveiled yet.

There’s nothing good about this decision except the feel-good aspect of it. At this point, the most important thing is to shore up rural demand. Apart from that, addressing the basic needs of people of what we generally describe as the informal economy — like the micro, small and medium enterprises — is the big issue here. Moreover, ensuring sufficient credit availability also becomes crucial. The Modi government needs to get these basic, elementary things under control instead of making wishy-washy announcements about things that may or may not materialise.


Not just rail fare and LPG price hike, Modi govt taking other decisions in national interest

Gopal Krishna Agarwal
National spokesperson, BJP

The LPG price hikes are dependent on the international prices of petroleum products. So, that’s why the price of an LPG cylinder is based on international compulsions. If one wants good services, then cost-benefit analysis becomes crucial. Moreover, issues with respect to recovery of cost and a company’s health are also important factors that demand attention. Rail fares are essential for revenue generation to meet India’s infrastructure costs. The BJP always keeps the long-term interest of the people in mind and also the economy as a whole.

The Modi government is taking a host of strong economic decisions in the national interest. These decisions are implemented based on the urgency of some measures. The government has been taking tough decisions for the benefit of the common man, whether it is regulating fuel prices, resolving bank problems, implementing GST or other such concerns. We are committed to the economic growth and the well-being of all people. And the government will continue to work towards making India an economic superpower.

Finance Minister Nirmala Sitharaman has announced a mega new year gift to people by laying out a roadmap of Rs 105 lakh crore investment in the infrastructure sector over the next five years to kickstart the Indian economy’s push towards the target of reaching $5 trillion by 2024.

The Modi government has planned massive investments in the railway infrastructure, renewable energy, housing, and there is also proposed investment of large sums for road construction.

Good infrastructure eases the life of the common man and at the same time creates demand in the economy. It also attracts investment from the public and the private enterprises, catalysing growth.


Modi govt has only marginally increased rail fare and this won’t really be of any help

Ajay Shukla 
Former member of traffic, Railway Board

The price hike decision will be an ongoing process. This was to rationalise the fare structure vis-a-vis the rate charges. However, the rail fare has been increased only marginally, and this will be of no help.

The proceeds from the price hike will bring at most Rs 5000 crore to the government’s kitty, an amount which is insignificant for the Indian Railways. This is why the decision to increase rail fares does not qualify as a tough decision; it would have been ‘tough’ if sales had increased substantially so that the gross subsidy between rate and fare would be reduced or eliminated.

The Modi government has consciously avoided to take the bold decision of increasing fares of suburban railway services, which is politically sensitive. They are cheap and are understood to be loss-making propositions. The government’s boldness would have been visible if it did not restrict itself to increasing urban railway fares.

The Modi government has also proposed restructuring of the railways. However, departmentalisation is not an issue. India’s logistical component of the cost of a product is the highest in the world. And this cost is increasing the cost of everything in India; it is dragging down the entire economy. If we are able to bring the cost of this rate down, then we can immediately improve the GDP growth rate and reduce prices by 4 to 5 per cent in one stroke.


Also read: Should Indian Railways be privatised to prevent it from going the Air India way?


By Kairvy Grewal, journalist at ThePrint