Business

Indian Railways’ passenger count rises but earnings shortfall still a worry

Updated : September 21, 2018 12:29 PM IST

Overall, the railways posted an 8.25 percent rise in earnings between April and August to Rs 74,241.39 crore.

According to the latest data, 37.5 million incremental passengers travelled via trains between April and August this year.

The Indian Railways recorded a jump in both passenger and freight traffic in the first five months of the current fiscal, boosting total earnings but the worries for the cash-strapped transporter are far from over.

The earnings for the Indian Railways, between April and August, are still short of the Budget target by 4.5 percent or by about Rs 3,500 crore. That translates to an earnings shortfall of about Rs 23 crore on an average, each day vis-à-vis the target.

Overall, the railways posted an 8.25 percent rise in earnings between April and August to Rs 74,241.39 crore.

The earnings boost suggests that an increased number of passengers are opting for rail journeys while enhanced coal loading has also helped lift the bottom line.

According to the latest data, 37.5 million incremental passengers travelled via trains between April and August this year. The news on the freight segment was also positive, with an incremental 26.75 million tons of freight being loaded on to the wagons during the five-month period.

A Trend Reversal

This increase in passengers actually marks a reversal in the trend seen till the first quarter of the current fiscal, when passenger earnings were declining despite a continued spike in freight earnings.

In the first quarter, unending train delays and rampant cancellations had impacted passenger numbers as well as earnings. The number of passengers taking a train to their destination, instead of a bus or a flight, had declined due to around 78 percent rise in the number of train trips getting cancelled besides significant delays due to an aggressive maintenance schedule undertaken, thus shutting down train movement for long periods of time.

Gross passenger earnings had declined by 1.37 percent to Rs 1,221.31 crore or by close to Rs 19 lakh on an average every single day during the first quarter. The number of passengers booked on an originating basis too declined from 2088.54 million to 2087.1 million or almost a 16,000 daily decline in passengers.

Lesser Train Delays, Increased Freight Load

However, the situation has improved during July and August as train delays have lessened. Data for April-August showed a rise of about 3 percent in suburban passengers and a decline of 1.2 percent in non-suburban passengers, thereby showing an increase in the total number of passengers by 37.5 million at 352.4 crore. And earnings from passengers have shown an almost 3.8 percent increase to Rs 21,332.58 crore.

As for the freight, the incremental load has led to an over 11 percent increase in earnings at Rs 49,420.82 crore. This comes after the railways posted record freight loading in FY18 and of the total earnings’ jump of Rs 10,000 crore, Rs 8,000 crore came from the robust growth in freight.

The reason why improved freight earnings are crucial to the railways survival is obvious from this statistic: freight earnings account for almost 65 paise of every rupee earned by the railways and are used to subsidise passenger earnings. So in effect, improved freight earnings are a life saver for the railways, which is expected to report one of the worst operating ratios in recent years this fiscal.

Operating ratio is a key metric which explains what the railways has to spend to earn each rupee. Huge pension and pay commission payments and lower than expected growth in passenger earnings are the two main reasons for the worsening operating ratio of the railways.

Boost to Finances?

According to a government report, railways operating ratio is projected at 92.8 percent at Budgeted estimates for 2018-19. While it remains to be seen whether this figure will be adhered to, railways own internal estimates peg the ratio for FY19 at a much higher level.

So in order to keep the show going, the railways finances for 2018-19 may need a further boost. The total earnings target in the budget for this fiscal is Rs 2 lakh crore, up from about Rs 1.78 lakh crore a year ago, implying the railways will have to generate an incremental revenue of Rs 22,000 crore this fiscal.

While it is eyeing about Rs 10,000 crore additional earnings from freight and another Rs 1,000 crore from the flexi-fare scheme (applicable for passengers on premium trains), this still leaves a gap of Rs 10,000 crore shortfall in the earnings target. And with recent reports suggesting that the railways is planning to dilute the flexi fare scheme across some premium trains, the revenue from this scheme too may fall short of the target.

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Indian Railways’ passenger count rises but earnings shortfall still a worry

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