Railway Reforms

Indian Railways powerful experiment on AC III tier economy class coaches


From UPSC perspective, the following things are important :

Prelims level : NA

Mains level : Economics, Infrastructure,Transport

AC III tier economy class coachesContext

  • The Indian Railways’ experiment to introduce AC III tier economy class coaches has started to pay off. Since its introduction, in the last one year, these coaches have earned the Railways more than Rs.230 crore in revenue.

AC III tier economy classWhat is AC III tier economy class coach?

  • The AC 3 tier economy class in Indian Railways is a milestone concerning pocket-friendly traveling experience for common man.
  • With fare slightly more than sleeper class and lower than conventional AC class.
  • The objective of the railway is to move sleeper class passengers to a comfortable AC class with luxurious facilities. AC-3 tier comprises air-conditioned coaches with 64 sleeping berths.

When it is introduced?

  • The Indian Railway has introduced the first AC III tier Economy Class for North Central Railway Zone in 2021 to provide a convenient traveling experience to the passengers.
  • As of now 7 trains are equipped with AC III tier economy class coaches are running on the tracks

AC III tier economy class coachesFeatures of the AC III tier economy coach:

  • Pocket friendly: According to the Indian Railways, the fair in these coaches are cheaper than the normal AC three-tier coach. Fares in AC III tier economy are 6%-7% cheaper than the AC III tier class. The economy class has a capacity of 83 berths compared to 72 in the regular coach.
  • Divyang friendly and modern designs: The coaches were specially designed for the convenience of the divyangs. Providing Improved and modular design of berths and ergonomically designed ladder for accessing the middle and upper berths etc.
  • Modern features: In these, modern arrangements have been made for mobile phones and magazine holders, fire safety, personalised reading lights, AC vents, USB points, mobile charging points.
  • Optimum Speed: These air-conditioned three-tier economy class coaches are capable of running at an optimum speed of 160 kilometers per hour.
  • More Capacity: The economy class has a capacity of 83 berths compared to 72 in the regular coach.

What is the current status of AC III tier class?

  • AC- III tier, the favorite mode of train travel of people falling in the bottom rung of the middle class, is the only class that earns the Railways profit among all its passenger services.
  • The AC III tier is the only class of service which has generated consistent profits for the Railways. Between FY16 and FY20,
  • AC III tier coaches carried only 1% of the total passengers, but were responsible for 21% of the earnings from travelers. Such a low-passenger, high-revenue dichotomy was not seen in any other class.
  • It is not as expensive as the other AC classes and at the same time, its share in revenue has not been impacted by the relatively low pricing

AC III tier economy class coachesRevenue of Indian railways

  • The overall revenue of Indian Railways at the end of August 2022 was Rs 95,486.58 crore, showing an increase 38 per cent over the corresponding period of last year.
  • Goods revenue climbed by Rs 10,780.03 crore (or 20 per cent) to Rs 65,505.02 crore till August-end this year
  • The revenue from passenger traffic was Rs 25,276.54 crore, an increase of Rs 13,574.44 crore (116 per cent) year-on-year.
  • Passenger traffic also increased compared to last year in both the segments — reserved and unreserved
  • Railways’ total revenue during the entire last fiscal (2021-22) stood at Rs.1,91,278.29 crore.

What are the issues faced by Indian railways to increase its revenue?

  • Cross Subsidized: The cross-subsidiszation in respect of second class, ordinary class and suburban services has increased continuously in the past five years with subsidy on ordinary class being the maximum,
  • Concessional fare: The revenue forgone in passenger earnings due to concessions to various categories of passengers (physically challenged persons, patients, senior citizens, Izzat monthly season tickets, press correspondents, sport persons and war widows among others) increased from Rs 1,994.83 crore in 2018-19 to Rs 2,058.61 crore in 2019-20.
  • Low -Revenue dichotomy in Expensive class: A high-passenger, low-revenue dichotomy was seen in the inexpensive classes. For instance, over 90% passengers travelled by second class which accounted for only 37% of the earnings.
  • Operational Loss: Operational losses (in crore) incurred while operating various classes of service. For instance, in operating AC first class service, the Railways incurred a loss of 403 crore in FY20


  • Adding more AC III tier economy class coaches is a step in the right direction as it has shown positive result in revenue generation for railways and it provides a travel with dignity to a common man. But If Indian railway has to benefit it have to work extensively on operational loss incurred out of low Revenue dichotomy in Expensive classes.

Mains Question

Q. Indian Railways is often referred to as the lifeline of the country but runs at a loss when it comes to running class-divided coaches. In this context discuss the utility of class divided coaches.

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