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Tuesday, October 27, 2020

Railways plan to fight cash crunch: Get sponsors to clean stations, cut low-demand trains

The August-end figures indicate that Railways has already overshot its spending. Its earnings have grown by about 3.4% while its expenses have grown by about 9% this fiscal.

Written by Avishek G Dastidar | New Delhi | Updated: September 30, 2019 7:52:24 am
Indian Railways, Indian railways financial crunch, indian railways low demand trains, sponsors for indian railways Railways staring at shortfall of Rs 30,000 cr by year-end. (File)

With the Indian Railways facing a shortfall of nearly Rs 30,000 crore by year-end, amid a slowdown in earnings and mounting expenditure, the Railway Board has suggested a slew of measures — from getting sponsors to clean trains and stations, to cutting down trains with less than 50% occupancy.

“With a view to reducing expenditure and increasing earnings, Railway Board considered several immediate and short-term measures which need to be acted upon,” the board said in a letter, dated September 6, to its 17 zonal units.

The August-end figures indicate that Railways has already overshot its spending. Its earnings have grown by about 3.4% while its expenses have grown by about 9% this fiscal.

“Till July, our earnings and expenditure numbers were fine. It was in August that the earnings dropped because coal loading took a hit, thanks to unprecedented floods. Anyway, we are alive to the situation and are implementing a strategy to manage this,” Railway Board Chairman V K Yadav told The Indian Express.

Some of the measures proposed by the Board are: get cleaning of trains and stations done through sponsorship and Corporate Social Responsibility; review trains with less than 50% occupancy and decrease their frequency or merge them; get repair of staff quarters done by monetising Railways’ land; retire diesel engines which are over 30 years old to save fuel; save fuel cost by implementing better practices; optimise maintenance practices and rework operations for better earnings.

Indian Railways, Indian railways financial crunch, indian railways low demand trains, sponsors for indian railways The immediate focus is to raise about Rs 5,000 crore of savings, as that’s the amount that has been spent “off-budget” already.

“We have strategised to reduce fuel consumption and reduce cost of inventory, and also increase earnings. Zones have been given a free hand to raise non-fare revenue. There is day-to-day monitoring of all the key performance indicators. It has made a difference. I am optimistic that we will be able to meet our budgetary targets by the end of this year,” Yadav said.

The immediate focus is to raise about Rs 5,000 crore of savings, as that’s the amount that has been spent “off-budget” already.

“It has been decided that the additional impact of around Rs 5,000 crore on ordinary working expenses arising out of certain post-budgetary developments would be absorbed within the sanctioned grant of Rs 1,55,000 crore by effecting fuel expenditure (Rs 3,500 crore), staff cost (Rs 1,000 crore) and the balance elsewhere in contractual payments, procurement of stores etc. Additional earnings to the tune of Rs 17,000 crore also need to be mobilised in the remaining period of the year,” the Railway Board has said in its letter.

What makes the job even more difficult is that Railway Minister Piyush Goyal has, internally, set an operating ratio target of 90%, although the official target, as per the Budget, is 95% this fiscal, the letter says. The current operating ratio is estimated to be way above 100%, sources said.

At the heart of the crisis is the fact that from April to August this year, Railways faced a shortfall in earnings, while its expenditure rose. The September figures are not in yet.

In earnings from passengers, the shortfall against the budgeted target is around Rs 11,852 crore. While Railways factored in a growth in passenger traffic of around 1.8%, it saw an overall drop of 1.3%.

Freight loading fell short by 10 million tonnes as per the budgeted target — its last year’s “adjustments” by taking advance freight to show better earnings is now hitting the department, sources said. The shortfall in freight earnings vis-a-vis the budgeted target is around Rs 8,600 crore.

This is partly because out of the advance freight of Rs 13,000 crore taken from NTPC last year, Rs 8,200 crore is to be adjusted in the current year. As a result, freight earnings have grown by only 2.8%, whereas the growth was to be over 12% this year for the Budget calculations to fall into place, said officials.

As per official calculations, while there is a surplus of just Rs 2,000 crore in net earnings by August-end, the Railways’ books are brought down by Rs 20,000 crore after it discharges its pension liabilities, sources said.

On the expenditure front, Railways had budgeted ordinary working expenses at around Rs 1,55,000 crore this fiscal. That’s a growth of around 10% over the previous year. However, it spent Rs 68,000 crore by August-end, which is around Rs 1,800 crore more than what was expected.

With earnings not picking up, Railways recently waved its “busy season” surcharge, which is levied on freight customers from October to June, hoping to wean away traffic from the road sector.

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