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Tuesday, 03 July, 2018, 14 : 00 PM [IST]

IRCTC to receive INR 120 cr from Finance Ministry to offset losses due to waiver of service charge

As per the Financial Express report, Indian Railway Catering and Tourism Corporation (IRCTC) will receive INR 120 crore from the Ministry of Finance, Govt. of India, to offset the losses due to waiver of service charge on tickets booked online through its portal in 2018-19. This follows a similar reimbursement of INR 88 crore for 2017-18. According to a government official, reimbursements to IRCTC will continue till it is allowed to charge for e-ticketing services. After the demonetisation of old INR 500 and INR 1,000 notes in November 2016, IRCTC was asked not to charge customers for online ticketing service in order to promote digital trans- actions. While initially the directive was to not levy the charge till June 2017, the timeline has been revised multiple times and no service charge is levied till date.

IRCTC used to charge INR 20 on each sleeper class and INR 40 on each air-conditioned class e- tickets. It also collected INR 80 for sleeper class and INR 120 on all other classes of i-tickets. According to IRCTC’s annual report for 2016-17 the withdrawal of service charge by the government has resulted in a loss of around INR 220 crore in turnover of the company during the year. The state-run company incurs INR 100 crore as cost every year on its ticketing operations including marketing and after sale service. The reimbursements made by the government is to compensate for the operations cost. In 2016-17, the revenue from internet ticketing operations of the company stood at INR 466 crore compared with INR 632 crore in 2015-16. 

"The payment is for compensating for the cost of operations. Though IRCTC had demanded INR 150 crore, it (cost of operations) has been assessed at INR 120 crore for the year,” said the official, adding that the reimbursement amount is bound to increase every year as the cost of operations go up. The issue of service charge has also marred the process of the firm getting listed, which was initially planned for the last financial year. The valuation of IRCTC has dipped as its main source of income was cut without an alternative mechanism in place. Earlier this month, Piyush Goyal, Minister of Railways, Government of India said that he had intervened to stop the listing of IRCTC as he wants to look for ways to monetise the huge database of the company.

Online ticketing is the mainstay of IRCTC which accounts for 62% of the Indian Railways reserved tickets booked online. The company claims to have sold more than 5.73 lakh tickets daily through its website in 2016-17. The other business segments of the company include catering and hospitality, manufacturing packaged drinking water under the brand name Rail Neer and offering travel packages. The company is hopeful to see an increase in its turnover given that the catering policy announced in February 2017 handed over catering services to IRCTC for setting up new mechanised kitchens and fixed rates for meals on-board trains.

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