Railways Year Book

Railways Year Book Logo
High Speed Rail
Railways Year Book Logo
High Speed Rail

Parliamentary Committee pulls up Indian Railways over losses

A drastic fall in the net revenue of the Indian Railways has left the Parliamentary Standing Committee on Railways perturbed. Net revenue is essentially the excess of the Railways’ receipts over expenditure or its ‘profits’. In FY2021-22, the Indian Railways recorded a negative net revenue or loss of ₹15,024.58 crore.

In it’s Demands for Grants Report, the committee has observed that the Railways’ net revenues has witnessed a drastic downward trend since 2020-21 except in 2014-15, when it witnessed an increase of 8.20%. “During the last five years, with effect from 2018-19 onwards, the revised estimates (RE) were reduced to more than 50% and the actuals were far behind from RE in all these years,” the panel noted.

The Railways noted that it recorded a loss due to a sharp rise in staff cost following the implementation of the 7th Central Pay Commission in 2016-17 and 2017-18, and the adverse impact of the COVID-19 pandemic from 2019-20 to 2021-22. This limited the Railways’ ongoing efforts to enhance net revenues.

The committee pulled up the Railways, stating that the persistent decline in internal resource generation is an indicator of internal deficiencies in the overall planning and management of the Railways. “The committee are perturbed to note that despite enhanced budgetary support and extra budgetary resources, Railways have not been able to generate sufficient fund internally,” it said.

The Indian Railways has planned to reverse this and set a net revenue target of ₹2,393 crore for FY2022-23.

The committee has recommended the Ministry of Railways should institute remedial measures to plug leakages and stem the trend of declining net revenue, and find ways and means to generate and augment Railways’ revenues.

The committee has stressed that Railways should explore other non-fare revenues like advertisements or hoardings at railway stations, trains, railway bridges and other assets; monetisation of surplus railway land; and setting up ATMs at railway stations.

Another determinant of the Railways’ financial health is the operating ratio — an indication of how much the Railways spends to earn one rupee. Operating ratio is a function of the total working expenditure to the total traffic earnings. A lower operating ratio indicates robust financial health. The committee has noted that the operating ratio of the Indian Railways has been persistently high. However, from 97.29% in 2018-19 to 98.36% in 2019-20, the operating ratio touched 107.39%, the highest ever, in 2021-22. The Railways has said before the committee that it has recovered from impact of the pandemic and was aiming at a target operating ratio of 98.22% in FY2022-23.

The committee noted that the Railways had appropriated ₹70,516 crore from its revenues to its pension fund, and stated that the Railways’ ever growing social service obligations had impacted its operating ratio adversely.

The Indian Railways is now looking at capacity improvement works such as Dedicated Freight Corridors, doubling/quadrupling and electrification of railway lines, ring-fencing allocation for ongoing last mile projects, and priority projects for early completion to enhance traffic throughput and increase revenues, it has stated.