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Freight boosts Railways’ revenue, not passenger trains

Freight boosts Railways’ revenue, not passenger trains
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First Published: Tue, Feb 26 2008. 04 48 PM IST
Updated: Tue, Feb 26 2008. 04 48 PM IST
New Delhi: The nation’s biggest employer, the Indian Railways still spends more than one-third of its earnings on staff wages and pensions while heavily relying on freight earnings to chug along.
Indian Railways earns 65% of its revenues from freight movement, with passenger fares contributing a meagre 26%, clearly pointing to cross-subsidisation - tariff earnings on goods movements filling in for the discounts being extended on passenger fares.
According to the Explanatory Memorandum for Railway Budget presented in Parliament by Lalu Prasad, the Indian Railways in 2006-07 saw 65 paise out of every rupee earned coming from freight earnings. Passenger earnings accounted for 26 paise while other coaching earnings, sundry earnings and miscellaneous receipts gave three paise each.
When it came to outgo, staff wages and allowances ate up 26 paise out of every rupee earned while pension fund charged another 11 paise. Fuel to run the railways took away 17 paise out of every rupee and 13 paise were contributed to Capital Fund. Dividend to the government took seven paise out of every rupee earned and an equal sum went towards Depreciation Reserve Fund. Special Railway Safety Fund was given one paise and Development Fund three paise. Lease charges (3 paise), stores (4 paise) and miscellaneous expenditure (8 paise) accounted for spending.
However, the railway minister was confident that the gross traffic earnings would grow by over 12% next fiscal, despite slashing passenger fares and announcing cuts in freight rates for select commodities and destinations.
“Maintaining an overall double digit growth, gross traffic earnings have been projected as Rs 81,801 crore, reflecting an increase of Rs 9,146 crore on the revised estimates for the current year,” Lalu Prasad said in his budget speech.
Freight earnings are expected to rise by 10.38% next fiscal to Rs52,700 crore from the revised estimates of Rs47,743 crore in 2007-08.
This is despite the fact that Lalu Prasad announced various freight cuts like 5% on petrol and diesel, 14% on fly ash and 6% for goods carried to the northeast.
Freight earnings have been revised by Rs800 crore for the current fiscal following an 8.2% increase in freight loading in the first nine months, Prasad said.
“Based upon the current trend, we have increased the budgeted target of freight loading for the year 2007-08 from 785 MT to 790 MT,” the Railway Minister said.
Passenger earnings are projected to increase by 8% to Rs 21,681 crore next fiscal over revised estimates of Rs 20,075 crore in the current financial year, Lalu Prasad said.
This despite a 7% cut in AC-I class fares, 4% in AC-II class fares and 5% reduction in second class mail/express train fares.
In the current financial year, passenger earnings have registered an increase of 14% in the first nine months, leading to revision in the revenue.
With the change in goods classification, the freight rate of Rs3,655.90 per tonne would be reduced to Rs 3,481.80 for a distance of up to 4,275 km. It is likely to benefit across-the-board the industries that require movement of bulk goods.
Claiming an unprecedented growth in freight traffic, the Railway Minister said that unlike in the past, freight rates are no more based on the value of goods, but are fixed after taking into account Railways’ competitiveness and elasticity of demand.
Under the new pricing strategy, he said surcharge is levied during peak season and discounts offered during lean season. Peak and non-peak seasons have been fixed uniformly for all the commodities, he said.
For loading of incremental traffic from empty flow direction, the discount has been increased from 30% to 40%, which will benefit old customers as well.
He said the general managers would be empowered to offer discounts of up to 50% on incremental traffic loaded from sidings and up to 40% on the entire traffic loaded from goods sheds. This is likely to attract more traffic.
Under the Merry-Go-Round (MGR) traffic scheme, he said the Railways would provide terminals at both ends with associated track and infrastructure at a lump sum rate.
The Railways has set up a target of 1,100 million tonnes of freight loading by the end of 11th Plan and would add a capacity of 310 million tonnes over the next four years.
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First Published: Tue, Feb 26 2008. 04 48 PM IST