Highlights

  • IRCTC and Ministry of Railways used to share revenues in 80:20
  • The majority part of IRCTC's revenues come from the convenience fee
  • IRCTC's daily ticket booking numbers have been doubled

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IRCTC- Flip Flop Friday: How the govt railroaded shareholders

The govt had asked IRCTC to share 50% of its convenience fee revenue with the Railways and then reversed the decision. 

Pulling the red chain of brakes on IRCTC dream run at the stock market, the govt shocked the shareholders by demanding a large piece of the IRCTC revenue pie, only to reverse the decision a few hours later after the violent reaction on the stock that wiped out Rs 18000 cr.

What did the govt intent to do?

The Indian Railway Catering & Tourism Corporation Limited (IRCTC), on Thursday, announced that the Ministry of Railways has decided to share the revenue IRCTC earns from convenience fees in the ratio of 50: 50. IRCTC informed that the Railways Ministry has said the revenue-sharing arrangement would be enforced from November 1.

Did the govt get greedy?

Convenience fees charged from customers generated a sizable revenue for both IRCTC and the Railways. The fee is not part of the rail fare. It is for the service of online ticket booking offered by the IRCTC.

In 2019-20, IRCTC earned Rs 352 crore from convenience fees and in 2020-21, it earned Rs 299 crore. Till August this year, IRCTC had earned Rs 224 crore.

Why was it so 'inconvenient' for the shareholders

Earlier, IRCTC used to share only 20% of the abovesaid revenue with the Railways. With bookings moving largely online the bets on IRCTC fortune were big and evident from the surge in the stock over the last 1 year, 1200% since its listing two years ago.

Fool me once, shame on you; fool me twice, shame on me

Despite the reversal analysts across the board are citing this order as a big hit to sentiment around Public Sector Units (PSUs) as it reiterates the unreliability in investment due to sporadic decision making by the govt. Dalal Street getting jitters and spoiling the PSU party is bad news for the Centre that is booking it's ticket for the LIC IPO bash later this fiscal.

Read/Watch Also: IRCTC; the social media angst

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