A parliamentary committee has recommended that the Ministry of Railways should undertake “prudent adjustment” of passenger fares to reduce the burden on freight segment, while highlighting that the Railways’ operating ratio, which helps determine the financial health of the national carrier has regularly deteriorated after 2015-16.
The committee, in its report tabled in Parliament on Monday, also said the actual earnings of the Railways have fallen short of projected earnings for all years since 2016-17, indicating that either unrealistic projections were made or the Ministry's efforts to actualise the accruals were not sufficient.
Noting that Railways’ revenues from passenger services have deteriorated due to suspension of operations during COVID-19, the panel, headed by former Union minister Radha Mohan Singh, has asked Railways to consider resuming passenger services keeping in view the protocol norms in various States to boost their revenues.
“...the tariff policy of the Indian Railways has traditionally followed the principle of cross subsidisation in order to offset the losses incurred in the heavily subsidised passenger and other coaching services through additional revenue from freight movement...The Committee feels that both passenger fares and freight rates have to be demand-cum-market driven and fixed differently for different segments,” it said, recommending that the Ministry undertake a “prudent adjustment” of passenger fares with a view to reduce the burden on freight segment.
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On the net revenues, the panel noted that over the last five years, Budget Estimates for revenues are being drastically reduced at Revised Estimate stage, and even the reduced targets nowhere matched the actuals.
It added that notwithstanding the Ministry’s reasons for the decline in net revenue, the panel strongly feels that it is imperative on the part of the Railways to keep the targets for net revenue realistic and strive for achieving the same.
Noting the regular deterioration in Railways’ operating ratio, the panel added that “Railway finances should be monitored and managed prudently by keeping a close and constant tab on the undesirable/ unproductive expenditure so that the operating ratio (OR) may reach at acceptable level in the near future”.
Operating ratio indicates how much the Railways spend to earn a rupee. For example, an operating ratio of 98.36% for 2019-20, indicates that to earn Rs 100, the Railways will have to spend Rs 98.36. “The Committee observed that for the fiscal year 2015-16, the Railways Operating Ratio was 90.5%. In contrast in the succeeding years the Operating Ratio has regularly deteriorated.”
For 2016-17, the operating ratio rose sharply to 96.5%. Subsequently, the OR was 98.4% in 2017-18, 97.29% in 2018-19. For 2020-21, it is estimated to be 131.4%, while for 2021-22, Railways is targeting OR of 96.15%.
The panel said to arrest the OR, it is essential that the Railways espouse a long-term planning strategy to enhance the efficiency in operations and target higher rail revenues.
The panel was also not satisfied with the funding pattern of the Railways, wherein approximately half of the capital expenditure is dependent on extra budgetary resources or EBR funding, “which is detrimental to the overall financial health of the Railways”. The Committee, therefore, asked the Ministry to take intensive measures to step up the generation of internal revenue with a view to avoid dependence on EBR to the extent possible.
In a separate report, the parliamentary panel noted that funds earmarked for passenger amenities in the years 2014-15, 2015-16, 2018-19 and 2019-20 remained un-utilized to the tune of 16.3%, 38.2%, 4.3% and 44.4%, respectively.
“...since the passenger amenities are directly connected with customer satisfaction and interface, there should be no dereliction on the part of Railways for proper utilisation of funds under this ‘Head’,” the panel said.
In 2014-15, ₹1,025.70 crore was allocated and out of this amount only ₹858.61 crore could be spent. In the year 2015-16, ₹1081.21 crore was spent as against allocated amount of ₹1,748.50 crore. In the year 2018-19, the actual spend remained to the tune of ₹1,585.88 crore against the allocation of ₹1,657.86 crore. Also in the year 2019-20, ₹1,903.11 crore could be spent against the allocated fund of ₹3,422.57 crore.
“The Committee are not convinced with the rationale of the Ministry that variation in utilisation is also due to late introduction of New Fund ‘Rail Sanraksha Kosh (RRSK)’ during the year 2017-18. They, therefore, recommend the Ministry to act proactively and prepare the realistic budget so that financial and physical targets are optimally achieved and the allocated funds could not be surrendered to Government account,” it said.
