In FY2018, the efficiency of the Indian railways dropped to its lowest in a decade, according to a recent report by the Comptroller and Auditor General of India. The organisation’s financial health worsened in recent years as its earnings from passenger traffic grew at a sedate pace while its expenditure on salaries and pensions multiplied.
Dwindling returns
In FY18, railways spent Rs 98.44 for every Rs 100 it earned: an operating ratio (OR) of 98.44%, the lowest in 10 years. Its surplus revenue dropped to Rs 1,665.6 crore, a six year low. Importantly, had it not been for the advances paid by the National Thermal Power Corporation Limited (Rs 4,761.0 crore) and IRCON (Rs 2,580 crore), the operating ratio would have shot up to 102.66% with a non-existent surplus.
Slow run continues
Sedate growth
The decline in operating ratio and revenue surplus can be attributed to poorer income growth in FY17 and FY18. In FY18, the growth of “earnings per passenger” slackened significantly for the third consecutive quarter while passenger traffic continued to grow at a robust pace.
Opposite trends
Mounting losses
Earnings from passengers grew at a slow pace as operational losses incurred in classes such as ‘sleeper’, ‘second’ and ‘ordinary’ ballooned in FY16 and FY17. For instance, in FY13, the Railways made a loss of Rs 40 crore in operating AC first class. Free tickets/passes and fare concessions contributed to the losses significantly.
Operating losses by class
Towering expenses
While income growth fell, the rate of expenditure increased for the railways. Staff expenditure and pension outgo surged in FY16 due to implementation of the Seventh Pay Commission. The robust increase in fuel costs and other expenses added to the burden. The graph shows this percentage change.
Working expenses
