Every year many factors including political expediency force the Union Railways Minister to announce the addition of several new trains, not all of which become operational owing primarily to economic inviability. This time around Mamata Banerjee has announced seventy new trains in the railway budget. Assuming, at least thirty
of them do take off this year, and a similar number every year for the remaining term of this regime, it would translate into downstream business opportunities of a whopping Rs 15,000 crore.
That the Indian Railways is the country’s lifeline, literally and metaphorically, is a fact well documented. This 160-year-old behemoth is the second largest rail network and the largest civilian employer anywhere in the world. The whole country would come to a virtual standstill if there are any disruptions like the nationwide railway strike of 1974 led by the then trade unionist and later cabinet minister George Fernandes. What is less documented, however, is how and to what extent the heavily subsidized passenger segment of the railways impacts downstream businesses, both under the direct domain of the railways and in the tourism and travel space, largely owned and operated by the unorganized small and mid-segment players that make up to 85 percent of the total sector.
The Opportunity
With little relevant available data, we at DARE decided to work out the numbers by extrapolating the data published by the Indian Railways, with some help from Rail Bhawan mandarins and experts who track the travel and tourism industry. After doing extensive research, we concluded that in the next five years, incremental additions in railway passenger traffic alone could potentially generate downstream businesses to the tune of Rs. 15,000 crore. A formidable opportunity indeed for the recession-hit domestic travel and tourism industry.
The numbers and how they add up
As per the data available with the tourism industry, about 35 percent of the total passenger load of the railways comprises of people who travel for pleasure or for pilgrimage, once or twice a year and contribute to the bulk of the spend accruing towards travel and tourism.
The remaining 65 percent of the people include those that are visiting relatives and friends and day travelers mostly traveling on business; such categories of passengers contribute insignificantly to the downstream businesses.
As per the ball-park figures available with the industry, a couple on vacation would travel on an average for four nights and five days in a year. On the trip, the couple would be expected to spend an average of Rs 700 a day on the room, which translates into Rs 2,800 on a single trip. Similarly, an average spend of Rs 300 a day on food, Rs 150 a day on travel within the city they’re visiting and Rs 1,000 on shopping and other miscellaneous expenses for the whole trip, would bring the average total expenditure on the entire trip to Rs 5,600. which in turn comes to an average expenditure of Rs 2,800 per person on a return journey (excluding the cost of the train ticket and any other expenses accrued towards the actual train travel per se).
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