Despite numerous initiatives to redevelop stations, improve passenger amenities and overhaul the ticketing system, the earnings growth of Indian Railways (IR) looks sluggish.
The IR has missed its earnings target in the least last three years and the current fiscal seems to be no different. There has been a shortfall in the revenue earned from both of IR’s main sources - passengers and freight - versus respective targets in 2015-16, 2016-17 and 2017-18. And in the current year too, between April and November 2018, earnings have failed to meet the target specified in the 2018-19 Budget.
The total earnings target in the budget for this fiscal is a little over Rs 2 lakh crore, which means IR will have to generate an incremental revenue of almost Rs 22,000 crore by the end of this fiscal compared to 2017-18. It is eyeing about Rs 10,000 crore additional earnings from freight but that still leaves a gap of Rs 12,000 crore.
A former chairman of the Railway board, on the condition of anonymity, told CNBC-TV18 that the IR’s earnings suffered because of skewed fare policies – freight rates remained uncompetitive while passenger fares have not been increased in years. He said the IR’s social service obligation – a euphemism for the losses it has to bear on transporting passengers – is well over Rs 40,000 crore a year now and will likely rise as populism trumps prudence. The executive also said that the recent tweaking of the flexi fare scheme – where fares rise with each 10 percent block of seats getting booked on select trains – was a step in the wrong direction as it would hurt generation of incremental revenue. Besides, flexi fares were applicable on less than 2 percent of trains so they were hardly impacting the common man.
The current dismal state of affairs continues despite earnings from passengers and freight showing a healthy increase in the month of November and for the eight month period till November this fiscal. Unless we see a dramatic improvement in the remaining months of the current fiscal, 2018-19 will also likely end with the IR reporting a shortfall in overall earnings vis-à-vis the Budget target.
According to the IR data, passenger earnings till November fell short of budgeted target by about Rs 700 crore and earnings from freight declined by almost Rs 3,000 crore versus the target. This means, on an average, the IR fell short of target by more than Rs 400 crore each month of the current fiscal from the targets set out in the Budget.
The MoS for Railways Rajen Gohain said in Lok Sabha last week that the shortfall till November in passenger earnings was due to a drop in non-suburban, non-PRS (unreserved) passengers. And the gap in goods earnings was mainly due to adjustment of the freight advance taken in 2017-18.
For the previous years too, similar reasons have been provided for the gap between target and actual earnings: for passenger earnings, the reason has consistently been a decline in unreserved passenger numbers till 2016-17. Passengers started flocking to the IR in 2017-18 but the gap between actual and targeted earnings continued as not nearly enough came back. As for freight earnings, freight loading also declined till 2017-18 as the IR had raised rates, making freight carriage uncompetitive versus other modes of transport such as roadways.
The data for the month of November held out some promise though. In November, two crore more passengers and over five million tonnes more freight was loaded on the IR compared to the same month last year. This means the gap between the targeted earnings and actual gross earnings of IR narrowed in November.
In fact, the terrific traffic performance for November seems to have comfortably reversed the gloomy picture seen earlier this fiscal, when passenger growth had been negative (in May) or flat (June) as the IR was struggling with serious punctuality issues and even freight loading growth was tepid. October saw the most freight growth in terms of loading this fiscal, with an year-on-year increase of over nine million tonnes. For passengers, August and September saw a cumulative increase of well over six crore passengers compared to the same two months last year.
So gross earnings in November neared the budgetary target comfortably – if one includes earnings from freight accruing from NTPC, which had been taken in advance – falling short by just a little over Rs 150 crore. But for April to November, total gross earnings were short. This means the IR will have to notch up earnings from passengers and freight, both in the remaining four months of the fiscal if it wants to be anywhere near the target set out at the beginning of 2018-19.
In other words, growth in passenger numbers and freight being loaded on to wagons must remain robust for the remaining part of the fiscal. As it is, the IR has seen efforts to boost non-fare revenue flailing, with a two-thirds gap between the target and actual earnings under this head – leaving increased traffic earnings as the sole source of income growth.
The IR has started the practice of taking advance payments from government entities like NTPC to shore up total freight earnings. The former Railway Board Chairman, quoted earlier, pointed out that taking freight earnings in advance was a questionable form of accounting and was only being done since “the IR follow cash based accounting now. When accrual based accounting starts, such practices will have to stop”.
Then, IR data showed it reported earnings of Rs 4,182.31 crore (Rs 3937.70 crore) from passengers in November, a growth of 6.21 percent or almost Rs 244 crore in a single month. Earnings from freight jumped by 4.5 percent to Rs 9,915.59 crore (Rs 9489.71 crore), an increase of over Rs 426 crore. But sundry (non- fare) earnings declined from Rs 325.28 crore in November last year to Rs 303.29 crore this November. Total traffic receipts for the month were Rs 14,801.24 crore (Rs 14102.29 crore). Gross earnings between April and November this year over the same eight-month period last year were Rs 114,595.43 crore (Rs 109209.15 crore), an increase of a little less than Rs 5400 crore.
The IR needs to improve its earnings further to narrow the gap between the actual and the budgetary targets. Remember, almost 66 paise of every rupee earned by the IR comes from freight and are used to subsidise passengers, where the national transporter continues to bear a loss on each seat. So not only is the IR unable to harness its massive potential to haul freight (outside of coal), it has been losing money on each passenger it transports. And given the fact that this is an election year, there is little likelihood of any increase in passenger fares; freight rates have recently been hiked on select commodities though.
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