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Indian Railways Made its Least Ever Profits in the Last Financial Year. Here's What it Means

Operating ratio is an indicator of the financial health of Railways. It shows how much the Railways spends to earn a rupee. An operating ratio of 98.5% essentially means that the Railways spent 98.5 paisa to earn 100 paisa (Re 1) in the last financial year.

News18.com

Updated:April 20, 2018, 12:33 PM IST
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Indian Railways Made its Least Ever Profits in the Last Financial Year. Here's What it Means
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New Delhi: At 98.5 percent for financial year 2017-18, the Indian Railways is set to communicate its worst ever operating ratio to Comptroller Auditor General (CAG). The Union Budget in February had announced a revised operating ratio, a measure of its performance, of 96 percent.

This would be the highest ratio since 2000-01 when it was 98.3 percent, which was previously the worst-ever for the national transporter.

WHAT IS OPERATING RATIO?

Operating ratio is an indicator of the financial health of Railways. It shows how much the Railways spends to earn a rupee. An operating ratio of 98.5% essentially means that the Railways spent 98.5 paisa to earn 100 paisa (Re 1) in the last financial year. This implies a negligible surplus. Therefore, lower the operating ratio, better the financial health of the institution.

The Indian Railways defines operating ratio as “the ratio of working expenses to gross earnings expressed in percentage” and is worked out by the following formula:

(Working expenditure/ Gross earning) x100.

Simply put, operating ratio can be expressed as the expenditure incurred in getting every 100 rupees as earnings.

WHY THE SURGE IN OPERATING RATIO

“Whenever there is a pay commission the expenditure naturally goes up. This time it was the seventh pay commission,” Minister for Railways Piyush Goyal had told News18 at its event, Rising India.

Sources in the Railways said that the Rs 20,000 crore spike in salary bill and pension liability hit the Indian Railways hard.

“Full implementation of the seventh pay commission dented finances,” said a senior Railways official.

Major reasons that have been cited for worsening operating ratio include, less than expected revenues from monetisation of assets and dividend from PSUs going directly to the Finance Ministry after the merger of the Budget.

The Railways also couldn't meet its land monetisation and commercial exploitation target of Rs 20,000 crore as the realty market wasn't upbeat. Only Rs 10,000 crore could be extracted from the non-fare revenue box.

The operating ratio has been around 90% for the last six years. In 2013-14, it was close to 94%. The last time Railways reported an operating ratio of 98% was in 2000-2001. Globally, an operating ratio of 80% or below is considered healthy as it allows Railways to invest through its own resources in capacity expansion and modernisation.

THE ROAD AHEAD

Sources from the Ministry have told News18 that the prime focus will now be the GiveitUp campaign. The Ministry will be going big in convincing monetarily adequate senior citizens to give up subsidy. The Indian Railways is burdened with Rs 33,000 crore of passenger subsidy.

The Ministry of Railways has also reinforced the following pointers to keep the operating ratio as low as possible:

Punctuality of passenger trains should be maintained.

Transportation of goods traffic from one place to another place should be done quickly and expeditiously.

Fuel economy measures should be adopted.

Unproductive utilisation of rolling stock should be minimised.

Full and better utilisation of rolling stock should be made.

High standard of repair work should be executed to the rolling stock.

Accidents, derailments should be prevented and efforts should be made to check claims.

WHAT PRECEDED

In what has been affecting the Indian Railways’ manoeuvring power in terms of providing better facilities to its passengers, the CAG had earlier stated that Railways’ operating ratio was 96.50 percent in the last quarter.

“The Operating Ratio during 2016-17 had deteriorated to the lowest level of 96.50 percent since 2000-01 when it was 98.34 percent. Since Operating Ratio is a direct indicator of the working of Railways, the Ministry of Railways should also look into the various innovative ways for revenue generation and closely monitor the expenditure,” said the report.

Minister for Railways Piyush Goyal, while talking about reducing losses on 13 February 2018, blamed the Trinamool Congress and Congress Party for deteriorating the financial condition of the Indian Railways and said that the political outfits owe answers to the country.

Goyal said the NDA government in 2014 got the poor performing Indian Railways as part of the legacy. “If anybody is responsible for pushing the Railways to this stage then it is the Trinamool and Congress,” he said.

Goyal also accused West Bengal Chief Minister Mamata Banerjee of putting an additional financial burden on the Indian Railways by making loss-making Kolkata Metro a subsidiary of the Railways. “The thought of the party and its leaders are limited,” he quipped.
| Edited by: Aditya Nair
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