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Friday, October 30, 2020

Railways facing ‘worst crisis ever’; FY20 books may see revenue deficit

The Budget, to be presented by Finance Minister Nirmala Sitharaman on Saturday, however, might not reflect this scenario yet, papering over what is being believed to be the worst financial crisis ever faced by the national transporter.

Written by Avishek G Dastidar | New Delhi | Updated: February 1, 2020 5:16:11 am
Indian railway crisis, Indian railways budget, Railway budget 2020, Nirmala Sitharaman Railway budget 2020, indian express news The foregoing of the 15 per cent busy season surcharge on freight rates earlier this year has meant that while the loading numbers have remained somewhat constant, the corresponding earnings figures have taken a hit.

The Railways is staring at a revenue deficit of around Rs 25,000 crore as its expenditure is likely to overshoot the income by the time its books are closed in April for the current fiscal, sources said.

The Budget, to be presented by Finance Minister Nirmala Sitharaman on Saturday, however, might not reflect this scenario yet, papering over what is being believed to be the worst financial crisis ever faced by the national transporter.

Facing a crunch, the transporter had used up its funds reserves of approximately Rs 3,000 crore to salvage its books last year, while it started the current fiscal after factoring in over Rs 10,000 crore freight earnings of this year as last year’s income thanks to its Freight Advance Scheme. This is the first time that the transporter is facing the prospect of closing its books with a revenue deficit. In other words, it is struggling to meet its expenses from its own earnings. The real operating ratio is said to be in the region of a precarious 110 per cent, whereas the target was 95 per cent. The Indian Railways’ revenue expenditure shows a rise of 10 per cent, in which the staff cost (salaries and pension) is up by around Rs 8,000 crore in January. In contrast, freight earnings during the same period are up by less than one per cent. Overall, earnings are in the negative growth territory, sources said. Freight loading is likely to be as good as or a little more than last years, they added.

The foregoing of the 15 per cent busy season surcharge on freight rates earlier this year has meant that while the loading numbers have remained somewhat constant, the corresponding earnings figures have taken a hit.

This time around, with demand for coal transportation flattening out in a tepid economy, the transporter may struggle to get major freight customers to sign up for similar advance schemes in a big way, officials said.

A few months ago, as part of the Budgetary exercise, the zonal railways had projected a massive shortfall, which meant the revenue expenditure had grown to be beyond budgeted expectations. However, sources said the Budget documents have been “tallied” and the real crunch may be visible only after the Budget, in April when the books are to be closed. The outlay of Gross Budgetary Support from the Finance Ministry is expected to be more or less the same as last year, sources said.

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