IRCTC, the catering and online ticketing arm of Indian Railways, has been given a big relief from the finance ministry. According to the media reports, the finance ministry has agreed to reimburse ₹80 Crore to IRCTC on the account of lost revenue due to revocation of service charge on online ticket booking post demonetisation. IRCTC was, however, planning to quote an amount of ₹600 Crore, however, the ministry has only taken into consideration the actual cost incurred and not the margins made on the tickets booking. According to sources, the reimbursement will be a big help in removing the possible hurdles faced by IRCTC ahead of its proposed IPO.
According to a railway official, IRCTC used to collect an average of ₹600 crores annually as service charge. Out of the total amount collected, half the amount used to be paid to railways and IRCTC was keeping the other half. However, with the transactions going mostly online, the cost of operations has reduced drastically and because of the same, it is expecting to receive ₹80 – ₹100 crore from the finance ministry.
The finance ministry had ordered IRCTC to remove service charge on the online ticketing from November 2016. It was done in order to promote digital transactions and to attract more and more people to book the tickets online. Earlier, the ministry had stated that the revocation of service charge was until June 2017, however, in two separate announcements, the limit was extended to March 31st, 2018. Before November 2016, IRCTC charges ₹20 on every sleeper ticket and ₹40 on every AC class ticket booking. Also, in the case of i-tickets, the amount used to be ₹80 for sleeper tickets and ₹120 for travel in higher class. IRCTC had planned its IPO within this financial year, however, revocation of service charge seems to have delayed the process. Also, with Piyush Goyal taking over as the railway minister, there are rumours that he is betting on a change in business model before the IRCTC IPO.
Along with applying for IRCTC IPO, the central government is also planning to raise funds with the IPO of three independent units under the railways. These units include IRFC (Indian Railways Financial Corporation), Ircon International and RITES. The process seems to have begun and the railways is keeping a deadline of the end of the ongoing financial year for the IPO. Though the valuation of other verticals seems to remain the same, IRCTC has lost a major chunk of its valuation due to cut down in its main revenue source. According to finance ministry officials, the reimbursement will make sure that IRCTC does not report losses, however, the earnings and valuation will not remain same as before.
IRCTC Counts ticketing as its main revenue source. According to the annual IRCTC report for 2015-16, it had got 43% of the total earning from online ticketing. Out of the rest, 26% earning was from tourism and 23% came from catering.