Indian Railways wants to earn ₹150 billion in non-fare revenue by 2028

• The Indian Railways gets round 5% of the revenue from non-fare sources, compared to 10-20% that other national railway systems earn.
  
• In January 2017, the Railways Ministry announced a number of initiatives to increase non-fare revenues through advertising on trains and offering on-demand entertainment services.
• This policy hasn’t yielded the desired results so far. Hence, the government has decided to offer tenders with shorter contract durations and decentralise the implementation of the non-fare revenue scheme to the zonal level.

In the past few years, the Indian Railways has made a conscious effort to increase the portion of its revenues that it doesn’t earn from fares in a bid to ensure its long-term financial sustainability. Around 5% of the revenue of the world’s fourth-largest rail network comes from non-fare sources, while the figure is 10-20% for national railway systems in other countries.

In January 2017, the then-Minister of Railways, Suresh Prabhu, announced a number of initiatives to increase non-fare revenues through advertising on trains and railways infrastructure like crossing gates and roads as well as through on-demand entertainment services.

Fast forwarding to September 2018, those initiatives are yet to come to fruition. The tenders floated did not receive an enthusiastic response from vendors. In 2017-18, the Indian Railways earned only ₹86 billion in non-fare revenue, compared with an original target of ₹140 billion, with most of this coming from the sale of scrap assets and station parking fees. This was also a 17% drop from the previous year.

Hence, the Railways Ministry has decided to revise its approach. It still plans to earn ₹150 billion in non-fare revenue, but is expecting to reach that level within the next 10 years. Here’s how it plans to get there:-

Shorter contract spans

In a circular issued this week, the Railways Ministry said it planned to award contracts for non-fare revenue projects for around three to five years, as opposed to original contract durations of five to ten years. In offering shorter licences for advertising on train compartments and bridges, setting up ATMs on railway platforms and offering content to passengers, the government expects to attract more vendors.

The licence fee for advertising services will be the same for the first three years, after which it will increase by 10% each year. The contracts will be capped at five years with an option to extend by one year.

Decentralisation is the name of the game

Rather than centralising all non-fare revenue operations, the Railways Ministry has decided to delegate decision-making and maintenance to the general managers of the 16 zones which the network is divided into. In terms of on-demand entertainment services, vendors will enter into a revenue-sharing model with the zonal railways division and share a percentage of their earnings above the fixed minimum guarantee.

Zonal heads will have full authority to implement the scheme. The move, which was announced in May, will facilitate a quicker vendor selection process and reduce the burden of oversight on the central government.