IRCTC Service Charge Waiver in Budget 2017 A Right Step?

Budget 2017-18 brings some good news for tech savvies. The service charge of 20 rupees and 40 rupees on sleeper and AC tickets will be quashed off. The step is definitely a positive one for the citizens who depend on digital transactions but it will impact the earnings of Indian Railway’s premier subsidiary IRCTC. This can cause potential threats to investment and business in future.

Impact on IRCTC and Indian Railways:

Major earnings of IRCTC come from collecting service charges. It amounts to nearly 30-32% of the total. Loosing this some will impact the listing potential of IRCTC. Not only this, the service charge collection covers the loss of other ventures like catering services. It made a profit of INR 1500 crore in the financial year 2015-16, out of which, 550 crores came from ticket booking service charge.

In order to boost cashless transactions, Finance Ministry withdrew the service charges and as per Arun Jaitely, the online booking gone up to 68%, 10% more than usual. Yet, removing charges will result in loss of 50-60 crore rupees per month. The question arises; will the Indian Railways compensate for this loss?

It can only be finalized at the time of evaluation. The government also plans to list IRCTC and other two subsidiaries on stock market in order to compensate the loss occurred due to withdrawal of service charge.

Possible Impact on Listing Potential of IRCTC:

According to the experts, the loss that IRCTC will suffer can impact the investment. Losing revenues will make IRCTC unattractive which will cause serious impact on its potential listing. The listing of shares on stock market is unlikely to gain any profit, said the expert. The venture is full of uncertainty and risks; therefore it is unlikely to gain any overwhelming response from the market

IRCTC is the most visited site in India. Yet it has limited growth due to limited services. IRCTC has maximum investments from Indian Railways. Availing other services on the website can be a way to boost investment. Profit matters at the time of evaluation and investment. It would be interesting to see how Indian Railways will manage to attract investment and earn profits without charging any service commission.