Three months into the new financial year, Indian Railways, the largest transporter in the country, continue to experience unprecedented strain, with expenditure rising above budgeted estimates and revenues falling below projections.
Working expenses have shot up by 17 per cent between April and June, compared to the corresponding period last year, and around three per cent over the budgetary provisions for 2010-11. Gross earnings, have registered a drop of three per cent compared to the set target.
Between April and June, the railways registered Rs 21,620 crore in gross earnings, Rs 755 crore less than the target of Rs 22,375. Working expenses, at Rs 17,848 crore, were around Rs 2,500 crore higher than the Rs 15,296 crore spent during the corresponding period last year, and about Rs 480 crore more than the target for the quarter. Ministry officials said expenses have risen primarily on account of increased salaries to employees in accordance with the Sixth Pay Commission.
Akhileswar Sahay, president of the infrastructure advisory division of Feedback Ventures, said: “Conventionally, railways’ earnings increase at a rate 1-2 per cent higher than the national GDP growth rate. In the present situation, railways are trailing GDP growth. Earnings are, therefore, on a decline. Freight traffic is not increasing at the rate it should. Passenger earnings are showing stunted growth as fares have not been raised for nearly a decade. Commodity mix remains the same. Even for the existing commodities, capacity constraints in infrastructure and rolling stock does not allow the railways to quickly take advantage of favourable market opportunities.”
Revenues from both freight and passenger traffic have fallen — by two per cent and five per cent, respectively — over the targets outlined for the first quarter of this financial year. While freight earnings have dropped by around Rs 350 crore to Rs 14,606 in the first three months of the year, revenues from passenger operations have declined to Rs 6,011 crore, against the target of Rs 6,334 crore.
It is a similar story with revenues from parcel earnings, which at Rs 605 crore, have declined by eight per cent from the target. The shortfall in sundry earnings is around seven per cent. The railways had made around Rs 398 crore in sundry earnings in the April-June period.
A former member of the Railway Board, who did not want to be named, said: “The financial health of the railways is a cause of concern. It is important that the management identifies the issues that have led to slippages in traffic and revenues. Stringent measures have to be put in place to control working expenses. Alternative sources of revenue have to be tapped on priority to sustain operations and developmental works.”
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Average freight tonnage, for one, at 72.60 million tonnes (mt), continues to remain well below the monthly target of 78.67 mt outlined in the budgetary provision. Loading has shown a decline for commodities across the board — in coal, pig iron, finished steel, iron ore, fertilisers and container service.
R Sivadasan, former financial commissioner, informed: “Loading usually picks up in the second half of the year, between September and March. At present, tonnage may not be a challenge.” However, railways should work on widening the basket of commodities it transports on the network, he added.
“The present trend of operating ratio, well in excess of 90 per cent, is unhealthy because, after taking care of operating expenses, it hardly leaves railways with internal accruals to undertake even urgent capex programmes of asset renewal and, as a result, there is not enough money available for new asset creation. On a long-term basis, this is unsustainable and railways will have problems if concerted effort is not made to tackle these problems,” Sahay said.
In 2009-10, the Indian Railways reported a shortfall in gross traffic revenues to the tune of Rs 1,700 crore, at Rs 86,644 crore, from the revised estimate of Rs 88,356 crore, which resulted in significant lower allocations.