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Railways’ 98% operating ratio not a reflection of its true financial performance: CAG

The CAG also noted that the national carrier needs to revisit the passenger and other coaching tariffs so as to recover the cost of operations in a phased manner and reduce losses in its core activities.

Written by Anisha Dutta | New Delhi |
Updated: December 22, 2021 11:11:16 am
The Railway Ministry has been seeking Finance Ministry’s help ever since the merger of the rail budget with the Union budget to take care of its pension liability, a demand which has not been met by the Finance Ministry so far.

THE COMPTROLLER and Auditor General of India in its report on Railways’ finances tabled in Parliament on Tuesday noted that the Indian Railways’ operating ratio of 98.36% in 2019-2020 does not reflect its true financial performance and if the actual expenditure on pension payments is taken into account, the ratio will be 114.35 %.

The CAG also noted that the national carrier needs to revisit the passenger and other coaching tariffs so as to recover the cost of operations in a phased manner and reduce losses in its core activities.

This comes at a time when the national transporter has targeted to reduce its operating ratio to 95%.

In 2019, CAG’s report said that Indian Railways has the worst operating ratio in the past 10 years at 98.44% and its revenue surplus has decreased by more than 66% – from Rs 4,913 crore in 2016-17 to Rs 1,665.61 crore in 2017-18.

Last year, the Indian Railways was able to lower its expenditure and make up for the shortfall in traffic through revenue generated by freight operations. A fall in pension liabilities also helped; Indian Railways’ massive pension bill of more than Rs 51,000 crore in the current financial year has been converted into a loan by the finance ministry.

The railway ministry has been seeking finance ministry’s help ever since the merger of the rail budget with the Union budget to take care of its pension liability, a demand which has not been met by the finance ministry so far.

The CAG report noted that against a target of 95% in the budget estimates, the operating ratio of the Indian Railways was 98.36% in 2019-20.

“The OR deteriorated from 97.29 per cent in 2018-19 to 98.36 per cent in 2019-20. Further, the OR of the Railways would have been 114.35 per cent instead of 98.36 per cent, if the actual expenditure on pension payments was taken into account,” the report stated. Thus, the operating ratio of 98.36 % shown by the Railways does not reflect its true financial performance, it stated.

During 2019-20, the Indian Railways generated total receipts of Rs 1,74,694 crore against budget estimates of Rs 2,16,935 crore, the report stated. It could not achieve even the revised estimate target of Rs 2,06,269 crore, the report said. The total receipts decreased by 8.30% during 2019-20 as compared to the previous year, it said.

“There was heavy dependence on transportation of coal which constituted around 49% of the total freight earnings during 2019-20. Any shift in bulk commodities transport pattern could affect the freight earnings significantly,” it stated.

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