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IA increases fares, railways hike freight rates

Indian Airlines on Monday announced a fare increase of 11.5 per cent on the domestic sector, while the railways on Monday spared the passengers from further increase in fares and instead decided to hike the fare on certain freight items.

Indian Airlines Chairman and Managing Director P C Sen said the hike, approved by the board which met on Monday, was only to offset increases in the cost of operations.

Input costs had gone up by Rs 2.61 billion during the past year of which Rs 1.96 billion related to domestic operations. In order to recover Rs 1.96 billion, a fare increase of 11.5 per cent in the domestic fares had become imperative, he added.

''It is a differential fare increase,'' Sen told newspersons. ''A large number of board members had suggested fare increase of 14 to 15 per cent. But we said it should only be 11.5 per cent, just to offset the input cost increase.''

The fare increase, coming after about a year, is not across the board but differential in nature. For sectors up to 700 kms, the increase is 14 per cent and for flights beyond 700 kms it is 10.5 per cent.

The differential increase comes because the longer the sector, the more economic is the operation as an aircraft consumes maximum fuel during takeoff and landing. Various committees such as the committees of the Planning Commission and the Kelkar Committee and others had therefore recommended differential fares.

Even though most operations in the northeast are short-haul, the increase in fare for operations within the region have been restricted to 10.5 per cent since the problems faced by the people there are different.

Since the US dollar fare tickets are sold sufficiently in advance by tour operators, adequate notice will be given to the industry regarding the increase, Indian Airlines said.

Sen emphasised that even with an 11.5 per cent increase, the domestic fares in India remained among the lowest in the world.

The increase in Indian Airlines fares was quite valid considering that railways and surface transport had hiked fares by 10 per cent and hotel room tariffs had gone up by 30 per cent.

The airlines said most of the input costs that had increased were beyond its control. Around 85 per cent of the costs of operations of the airline were governed by administrative prices of the government and other agencies.

Indian Airlines reserves had been wiped out by the grounding of the A320 aircraft, the merger of Vayudoot and having to continue loss making operations for socio-economic reasons. The airline does not receive any budgetary support.

It subsidises the national exchequer by continuing operations on purely socio-economic reasons to the tune of Rs 1.6 billion annually beyond the statutory requirements of the Directorate General of Civil Aviation.

The increase of Rs 2.61 billion in the cost of inputs of Indian Airlines since the last fare hike was largely due to an extra Rs 1.25 billion being spent on maintenance of aircraft.

Meanwhile, to meet the burden of over Rs 35 billion due to the implementation of the Fifth Pay Commission has decided to withdraw concessions to certain essential commodities given during the last budget.

Railway Minister Ram Vilas Paswan said that despite the revenue gap of a few billion rupees expected this year, the administration decided not to burden the common man and manage the situation by cutting on costs and expenditure.

The concessions withdrawn to essential commodities will help the railways mop up Rs 2.45 billion. Concessions are now withdrawn for fertilisers, chemicals, hydrogenated oils, vegetable oils, fruits, vegetables, wheat sugar, liquefied petroleum gas, kerosene and fodder. Some of the commodities have were given concession eight years ago.

Highly placed railway sources said withdrawal of 12 per cent concession given to kerosene, LPG, sugar and wheat will not affect the common man since they are administered prices and would be absorbed by the ministries concerned. Salt and jaggery would continue to enjoy the freight concession.

The railways mobilise the additional resources during the five and a half months of the current financial year from October 15.

The classification of coal has been increased by one step to enhance the freight rate on coal by four per cent. In the case of live stock, however, the increase will be about 28 per cent.

The total value of exemptions in the current financial year is Rs 7.7 billion.

The impact on the prices directly from partial withdrawal of exemption from freight to some of the essential commodities will be negligible. However, the impact of these revision on the wholesale price index will be 0.314 per cent.

UNI