Service charge withdrawal: Marginal growth in booking, huge drop in revenue

Marginal growth in online ticket booking, 26% drop in revenue
Marginal growth in online ticket booking, 26% drop in revenue

The Government in November 2016 decided to drop the service charges that customers had to pay while booking online tickets on IRCTC websites. The purpose was to promote the digital India campaign and attract more and more people to get their tickets booked through the website to minimise the use of cash and papers. However that hardly worked.

Indian Railway Catering and Tourism Corporation’s M P Mall internet ticketing revenue dropped by 26 percent in FY17 after the government withdrew service charge on e-tickets to promote digital payments. But what would hurt the Government more is the fact that the value of tickets booked online increased just 2 percent to Rs 24,485.21 crore.

According to a report, internet ticketing revenue dropped to Rs 466.05 crore despite a modest 5 percent increase in the number of railway tickets booked online on IRCTC platform. The online ticketing platform sold about 209 million tickets through 2016-17 compared to 199 million tickets sold the previous year.

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In November last year, the government had withdrawn service charges levied on tickets booked online to push India towards a digital economy. Prior to the decision, IRCTC used to levy a service charge of Rs 20 on every non AC e-ticket and Rs 40 for every AC e-ticket.

Overall, IRCTC’s total income increased by 4.7 percent at Rs 1,596.31 crore in 2016-17, however, its gross margin and profit before tax grew just over 7 percent to Rs 353.42 crore and Rs 211.71 crore, respectively.

Since the internet ticketing forms the second-largest category for IRCTC at 30 percent, the service charge withdrawal took a toll on operating margins. IRCTC’s operating margin dropped to 41.17 percent in 2016-17 as compared to 42.93 percent in 2015-16.

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