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Convenience fee and the dramatic fall before a sharp recovery: All you need to know about the IRCTC share price movement

As the stock prices of IRCTC plummeted, the Railway Ministry issued a prompt clarification stating that it is withdrawing the decision on sharing convenience fee with the IRCTC.

Precipitous movement was witnessed in the share price of IRCTC after the central government on Thursday had conveyed its decision to share the convenience fee collected by IRCTC in the ratio of 50:50. 

The decision had sent shockwaves on Dalal Street during the after-market hours on Thursday, foreboding a disaster that was awaiting the stock on Friday morning. And predictably, the stock plummeted to as much as 40 per cent to Rs 639.45 on NSE before making a dramatic recovery, rising 39 per cent to hit an intraday high of Rs 906. The stock is currently hovering around Rs 860 levels, 6 per cent down than its opening levels. 

Source: NSE

In the previous trading session, the share closed 10.65 percent or Rs 87.94 higher at Rs 913.75 on sub-division of the share price.

“It is to be informed that Ministry of Railways 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,” company said in a release.

The announcement made by the government to share the revenue collected by the IRCTC in a 50:50 ratio stoked negative sentiments in the market as the share of the company endured a beating on the stock market after investors estimated that the move may cut the company’s earnings by as much as 36 per cent. 

However, as the stock prices of IRCTC plummeted, the Railway Ministry issued a prompt clarification stating that it is withdrawing the decision on sharing convenience fee with the IRCTC. The sharp recovery of the IRCTC stock on Friday morning after plunging 40 per cent could be attributed to the government’s decision of reversing the decision on IRCTC convenience fee. 

But a top IRCTC official quoted by Moneycontrol aaid they have not received any communication from the government on the withdrawal of the revenue sharing agreement yet. The official further informed about a meeting scheduled between the company and the Railway Board today.

OpIndia also spoke to a source in the Railway Ministry about the convenience fee mechanism between the government and the IRCTC. Speaking on the issue, the official said that the convenience fee sharing mechanism is not a new phenomenon and had existed before the pandemic hit the country. The government had simply resumed its earlier sharing arrangement of convenience fee with the IRCTC, which was 50:50, the official said.

Convenience fee sharing mechanism not a new phenomenon, IRCTC’s earnings forecast robust: Railways official

During the pandemic, as restrictions were imposed, including on the railways, the central government had forgone its revenue share from the IRCTC. For the last two years, i.e 2020-21 and 2021-22, the Railway Ministry had relinquished its convenience fee share with the IRCTC. For three years before, there was no convenience fee levied on internet booking of tickets. Prior to that, during the financial years 2015-16 and 2016-17, the IRCTC and the Railway Ministry shared the revenue from convenience fee in the ratio of 50:50. 

Convenience fee mechanism shared between IRCTC and Indian Railways for the last few years

Dispelling doubts harboured by investors and common public, the official said there is no cause for concern as the income from internet ticketing is but a minuscule part of IRCTC’s revenue. As per its annual report for the year 2019-2020, IRCTC’s earning from ticketing forms only 5 per cent of its total earnings. There are other more potent sources of income for IRCTC. 

The Indian Railways has authorised IRCTC to facilitate the booking of tickets, provide catering services and packaged drinking water in trains and railways stations.

Furthermore, IRCTC is reportedly planning to run more commercially viable theme-based trains, which would form a major party of its revenue. Catering also forms another big chunk of IRCTC’s income, besides rail ticketing. In addition to this, IRCTC also draws revenue from its bus and air ticketing services. 

Last year, IRCTC earned Rs 299 crores from its ticketing business. In the current year, they have already racked up Rs 224 crores and is all set to get past its last year’s earning even if they had gone ahead with the revenue sharing. 

Ayodhra Ram Mandir special coverage by OpIndia

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Searched termsIRCTC convenience fee
Jinit Jain
Jinit Jain
Writer. Learner. Cricket Enthusiast.

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