Government

Railways Finds Itself With Tough Task of Reversing Operating Ratio Before March 31

While Goyal has promised an operating ratio of 96.2% in 2018-19, internal data shows it had touched the 110% mark by the end of December 2018.

New Delhi: In the interim budget speech, acting finance minister Piyush Goyal announced that the Indian Railways would aim to hit a fiscal operating ratio of 96.2% for 2018-19.

The operating ratio of the railways is expected to improve from 98.4% in 2017-18 to 96.2% in 2018-19 and to 95%  in 2019-20, he said.

Since the ratio – a metric that describes an organisation’s expenses as a percentage of revenue – is a measure of its financial health, the improved target is welcome news.

But how achievable is Goyal’s goal? Going by the current math, it may be a tough stretch.

Currently, the operating ratio has touched the 110.83% mark by the end of December 2018, according to a recent financial review prepared by the national transporter’s financial wing.

This means that the railways spends Rs 110.83 to generate Rs 100.

The railways’ total earnings during April-December 2018 was Rs 1,29,903.85 crore as against the 2018 Budget projection of Rs 1,36,286.77 crore, a shortfall of Rs 6,382.92 crore.

Earnings from passengers and goods have also shown negative growth by the end of December, as compared to the budget target. While revenue from the passenger segment is Rs 38,158.40 crore as against the target of Rs 38,644.84 crore, the earnings from the goods segment is Rs 85,329.11 crore as against the target of Rs 89,513.29 crore, according to the financial review report.

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The ordinary working expense during April-December period is Rs 1,13,576.12 crore as against the budget projection of Rs 1,12,383.36 crore in the current fiscal.

As a result, the operating ratio is under stress and has touched the 110.83% mark, data prepared by the railways’ financial wing reveal.

As pointed out above, this means that in the April-December period, the national transporter spent Rs 110.83 to generate every Rs 100, which is reflective of a lower growth in traffic against the set target and heavy outgo on account of increased pension liability and working expenses.

Currently, the loss in the passenger business is about Rs 30,000 crore. In this scenario it remains to be seen how the railways would be able to achieve the stated operating ratio target of 96.2% by the end of March 2019.

Though an advance in passenger bookings will significantly increase during the coming months keeping summer vacation in mind – and an expected increase non-fare revenue such as the station redevelopment project and advertisements – expenditures of the national transporter still may outpace earnings, railway officials with knowledge of the matter told The Wire.

The operating ratio is a gauge of operational efficiency that measures expenses as a proportion of revenue. Besides the working expenses, there are other expenditures — including pension liability, expenditure of the Railway Board and railway institutions — which far exceeded total income during April-December 2018, resulting in a higher operating ratio.

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A higher ratio also indicates less ability to generate surplus funds that could be used for capital investments such as laying new lines and manufacturing more coaches.

Goyal made the highest ever capital-expenditure allocation of Rs 1.58 lakh crore for the railways in the interim budget, while leaving passenger fares and freight rates unchanged ahead of general elections this year.

He allocated Rs 7,255 crore for construction of new lines, Rs 2,200 crore for gauge conversion, Rs 700 crore for doubling of tracks, Rs 6,114.82 crore for rolling stock and Rs 1,750 crore for signalling and telecom.

The capital support from the budget for the railways is proposed to be Rs 64,587 crore in 2019-20. The gross budget estimates under revenue for the year 2019-20 is Rs 2,72,705.68 crore, recording an increase of Rs 22,854.67 crore over the revised estimates for 2018-19.

Arun Kumar Das is a senior journalist. He can be contacted at akdas2005@gmail.com

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