Revenue crisis: Indian Railways spending Rs 114 to earn every Rs 100

The operating ratio, an indicator of how healthy the financials are, has touched 114 per cent — way off target of 92 per cent.

Written by Avishek G Dastidar | New Delhi | Published:November 2, 2016 1:09 am

Behind the glitz of freshly painted stations and inauguration of new trains, Indian Railways is facing its worst revenue crisis in recent times — it has now stopped earning any money. A letter from the Railway Board to zonal railways has revealed that the transporter is now spending Rs 114 to earn every Rs 100, practically wiping out any semblance of earnings.

Thanks to dipping demands for its services in both freight and passenger business, the shortfall touched Rs 12,400 crore by end of September, when a mid-term review of the financials takes places. In fact, it is Rs 3209 crore less than what the transporter had earned this time last year.

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Looking at these numbers, Railway Minister Suresh Prabhu is deeply concerned, says the letter from Railway Board Financial Commissioner KB Nanda to zonal general managers. This is the first year of the new cycle when the transporter’s financials will be scanned each year by the finance ministry in the context of the overall General Budget. With just a few more months to go before an early budget scheduled next year, the indicators do not instil confidence, ministry sources said. “The minister has expressed his deep concern and has issued instructions that immediate measures may be put in place so as to achieve the budgeted targets,” the letter says.

The operating ratio, an indicator of how healthy the financials are, has touched 114 per cent — way off target of 92 per cent.

By the mid-year review, Railways was behind its freight loading target by 35 million tonnes. In net terms, this was almost 10 million tonnes less that the loading done by this time last year. What is worse for the transporter is that not all of it is because of the lukewarm economy.

The letter says Railways’ credit realisation has hit rock bottom. As against a target of Rs 4,000 crore for credit realisation it set for itself, it has realised only about Rs 538 crore or about 13.25 per cent indicating that extraordinary efforts are needed to shore up finances during the next half of the fiscal year.

Railways has not only been losing in the financially draining passenger business, but it has also been losing its share of the pie in its erstwhile strongholds of coal belts in Eastern India.

Coming as this does in a year when the impact of the Seventh Pay Commission has started kicking in, the cash situation has left the top brass in Rail Bhawan worried. Steps like austerity measures, instructions for which have for long been in place now, are being advocated to at least cut the Ordinary Working Expresses—money railways spends to keep its house running.

The letter says these figures, if the trend is not arrested, will adversely affect the plan size, when railways has laid out an ambitious capital expenditure target of 1.21 lakh crore.