Ministry of Railways announces 50:50 convenience fee share from IRCTC

Target Date - November 1, 2021

In an after market surprise announcement, Indian Railway Catering & Tourism Corporation (IRCTC) announced that Ministry of Railways has conveyed it’s decision to the Company that it will have to share 50% of the convenience fee with the Ministry w.e.f. November 1, 2021.

IRCTC collected convenience fee of Rs 299 crore in FY21. However, this was a Covid impacted year. In FY 20 it had collected Rs 350 crore. IRCTC’s total revenues during these periods were Rs 783 crore and Rs, 2264 crore respectively.

More than the impact on the financials of IRCTC, the announcement once again came as a rude reminder to the investors about the underlying risks associated with government owned and controlled businesses.

It’s important to note here that IRCTC as on September 30, 2021 was owned 67.4% by government , 16.3% by institutions and balance 16.3% by retail.

I would personally not be surprised if the announced decision is a precursor to the government looking at privatising IRCTC in the due course. It’s easier to implement these decisions when you are in control.

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