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(Photo: Mint)
(Photo: Mint)

Indian Railways’ FY18 operating ratio worst in 10 years, says CAG

  • The Railways recorded an operating ratio of 98.44%, which means that the Railways spent 98.44 to earn 100
  • Had it not been for the advances received from NTPC and IRCON, the national carrier’s operating ratio would have been 102.66%

New Delhi: Indian Railways’ operating ratio was at its worst, hitting a 10-year high of 98.44% in 2017-18, according to Comptroller and Auditor General of India (CAG).

“The operating ratio of 98.44% was the worst in the last ten years. Indian Railways, in fact, would have ended up with a negative balance of 5,676.29 crore instead of surplus of 1,665.61 crore but for the advance received from NTPC and IRCON," according to CAG report ‘Union Government (Railways)- Railways Finances’ tabled in the Parliament on Monday.

Had it not been for the advances received from the two state-owned companies, the national carrier’s operating ratio would have been 102.66%, the report said.

The operating ratio is the amount spent of every rupee earned. In the last few years, the railways has been bearing high operating ratio, which indicates that it has not been able to generate higher revenue as compared to its expenses. According to the Union Budget, railways is eyeing an operating ratio of 95% in 2019-20, down from 97.3% a year ago.

The CAG report spelled out the impact of passengers fare concessions on railways’ earnings and effectiveness of the existing internal control mechanism to check misuse of concessions during 2017-18.

Indian Railways runs one of the largest logistics and transportation networks in the world. Its sheer scale of operations makes it a challenge to cater to demands of both freight and passengers. Railways, therefore, end up cross-subsidizing passengers by overcharging freight.

“Indian Railways was unable to meet its operational cost of passenger services and other coaching services. Almost 95% of the profit from freight traffic was utilized to compensate the loss on operation of passenger and other coaching services," it said, adding that one of the contributing factors towards this has been free and concessional fare and tickets.

According to CAG, 89.7% of the Railways’ revenue is forgone towards concessions was due to special consideration given to senior citizens and privilege pass holders.

“Several instances of misuse of passes and irregular grant of concessions on medical certificates were noticed. Passenger Reservation System lacks adequate validation controls to validate age of freedom fighters and to prevent irregular multiple booking on the same privilege pass," it said.

The audit analysis also showed declining trend of revenue surplus and the share of internal resources in the capital expenditure.

“The net revenue surplus decreased by 66.10% from 4,913 crore in 2016-17 to 1,665.61 crore in 2017-18. The share of internal resources in total capital expenditure also decreased to 3.01% in 2017-18. This had resulted in greater dependence on gross budgetary support and extra budgetary resources," the report said.

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