Withdrawal of service fee on online rail ticket costs IRCTC 26% drop in revenue

The withdrawal of service charge on booking of tickets through the IRCTC may have brought cheers to citizens but not to India's biggest e-commerce firm, the Indian Railway Catering and Tourism Corporation (IRCTC).

Service charge, which was a significant revenue generator for Indian railways, withdrawal has taken a toll on operating margins of IRCTC.

IRCTC saw a 26 per cent drop in Internet ticketing revenue to Rs 466.05 crore in the financial year 2016-17. Despite selling more than 10 million tickets in compare to 2015-16, value of ticket booked online increased merely by 2 % to Rs 24,485.21 crore, reports ET.

It sold around 209 million tickets in 2016-17.

Earlier, IRCTC charged Rs 40 on every ticket booked in air-conditioned classes. For sleeper class, a service charge of Rs 20 is levied. It earned Rs 551.49 crore in fiscal 2016 through service charges.

In 2016-17, the arm of Indian Railways registered a 4.7 per cent increase in total income at Rs 1,596.31 crore in 2016-17. It also saw single-digit growth in both gross margin and profit before tax.

Also read: Why IRCTC has refused to use payment gateways of these banks

To promote digital payment, the government withdrew service charge on online tickets in November 2016. e-ticketing accounted for 60 percent of overall reserved train tickets in India.

However, the company said to compensate the losses through other revenue verticals. "We are launching new tourism circuits to make the most of increasing domestic tourism. Also, we are launching various luxury initiatives for foreign tourists," IRCTC chairman Mahendra Pratap Mall was quoted as saying to ET.

IRCTC revenue verticals include catering and hospitality, bottled water Rail Neer, travel and tourism, and internet ticketing. Travel and tourism grew 41 per cent in 2016-17 to Rs 527.35 crore, contributing the most to the company's revenue at 34 per cent.

Besides aiming to monetise its site and mobile app, it is also planning to offer value-added tour packages to lure as many travelers as possible. In August last year, it also has introduced ‘Book Now - Pay Later’ service, allowing users to book tatkal tickets first and pay later.