Railways withdraws decision on IRCTC convenience fee: What you need to know

IRCTC shares plummted by 29% after it was asked to share half its revenue earned from convenience fee with the Railways, but staged a recovery after clarification from the government.
Indian Railways train
Indian Railways train
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The Ministry of Railways on Friday, October 29 said it is withdrawing its decision on Indian Railway Catering and Tourism Corporation (IRCTC) whereby it had asked the corporation to share 50% of its revenue earned as convenience fee from bookings on its website with the national transporter. This was an arrangement that had been discontinued since the pandemic. The Secretary of DIPAM (Department of Investment and Public Asset Management) said in a tweet: “Ministry of Railways has decided to withdraw the decision on IRCTC convenience fee.”

This follows, after in a regulatory filing on Thursday, October 28, IRCTC informed SEBI (Securities and Exchange Board of India) that the Railways has said the revenue-sharing arrangement would be enforced from November 1. Convenience fees charged from customers generated a sizable revenue for both IRCTC and the Railways. The fee is not part of the rail fare and is for the service of online ticket booking offered by the IRCTC. 

Meanwhile, IRCTC shares plummeted by as much as 29% after it was asked to share half its revenue earned from convenience fee with the Railways. However, the IRCTC stock had staged a recovery of 39% after clarification from the government. 

In 2014-15 when the revenue sharing ratio was 20-80, the Railway's online ticketing and catering arm received a majority of the Rs 253 crore revenue. The following year, the revenue generated from this was Rs 552 crore with a 50-50 share arrangement.

In 2016-17, with a similar revenue-sharing model, the fee generated Rs 362 crore as earning for the IRCTC-Railway combine. However, the convenience fee was discontinued thereafter and the duo did not earn any revenue from it till 2019. 

The IRCTC began charging the fee again during the coronavirus crisis mainly to boost its revenues during the slowdown. The Railways, however, gave up its share. 

In 2019-20, IRCTC earned Rs 352 crore from convenience fees and in 2020-21, it earned Rs 299 crore. Till August this year, the IRCTC had earned Rs 224 crore.

"In compliance with the Regulation 30 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, it is to be informed that Ministry of Railways vide above-referred letter has conveyed its decision to share the revenue earned from convenience fee collected by IRCTC in the ratio of 50:50 w.e.f November 1, 2021," the IRCTC had stated in its filing.

(With PTI inputs)

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