* Government freezes fares for city commuters
* Shows difficulty for govt in cutting subsidies
* Rail safety in question as four die in accident
(Writes through, adds details, context)
MUMBAI/NEW DELHI, June 25 The Indian government
partially rolled back a steep hike in rail passenger fares
announced last week after protests from allies, highlighting the
political realities facing the new prime minister in his push to
cut the country's massive subsidy bill.
Prime Minister Narendra Modi's government said late on
Tuesday that fares for city commuters will now effectively be
frozen, reducing the savings it will see from the fare rises by
an estimated 14 percent or some $180 million.
The decision will appease local politicians and voters in
Mumbai ahead of local elections that Modi and his allies are
expected to win. The largest number of India's suburban rail
commuters are in Mumbai and they were angry at the hike.
"Political realities, political compulsions do rule at some
point in India," said Tirthankar Patnaik, a strategist and
economist at Religare Capital Markets. "The loss of a few crore
is nothing compared to getting negative publicity."
The new government has said the country must cut subsidies
which ballooned under the last administration if it is to lower
the budget deficit and rebuild confidence in the economy.
But the realities of reducing subsidies - much of which flow
to the 70 percent of Indians living on less than $2 per day and
are spent on anything from diesel fuel to rice to transport - is
Many Indians see the railways, which transport an estimated
25 million people each day, as a service for the "common man",
making fare hikes for travellers particularly sensitive.
A previous plan to raise fares in 2012 and the ensuing
backlash cost the then-railways minister his job.
Under plans announced on Friday for a 14.2 percent rise in
passenger fares and a 6.5 percent increase in freight costs,
India would have reduced its 260 billion rupees ($4.4 billion)
railway subsidy bill by about 80 billion rupees.
After the rollback, the savings made will fall to around 69
billion rupees, analysts estimate.
"They've at least made a start, so the people are not as
angry as they were anymore," said Sanjay Raut, a leader in the
Shiv Sena party in the state of Maharashtra, which is allied
with Modi's Bharatiya Janata Party.
"We will continue to ask for a reduction in the monthly pass
fare as well, and our people in Delhi are speaking with the
parliamentary parties on that. We are not planning any protests
for now," he said.
Years of low investment and populist policies to subsidise
fares at affordable levels have crimped growth in new railway
lines, hindered private investment and limited much-needed
improvements in safety. In the latest incident, four people were
killed after a train derailed in the state of Bihar on
The government is expected to revive plans to open up parts
of the railway to foreign investors, and analysts will be
looking for any concrete signs of this when the government
presents the railway budget on July 8.
($1 = 59.7000 Indian Rupees)
(Reporting by Zeba Siddiqui in Mumbai and Tommy Wilkes in New
Delhi; Editing by Frank Jack Daniel & Kim Coghill)