Indian Railways improves operating ratio by a tad to 97.3% in FY19

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The Indian Railways has improved its operating ratio for 2018-19 to 97.3 per cent largely due to its largest customers — thermal power giant NTPC and cargo transport leader Container Corporation of India ltd (Concor). 

Operating ratio is calculated based on how much money the railways spends to earn each rupee. The government-owned companies gave freight advances to the tune of Rs 13,000 crore to the railways for its services that they will use in the current year. During the previous financial year, the railways’ operating ratio was 98.4 per cent. 

The PSUs paid advance under the ‘Freight Advance Scheme’ of the Indian Railways. This facilitates advance payment for booking rakes for companies that do business of more than Rs 500 crore with the Railways. NTPC paid Rs 10,000 crore as freight advance to the Indian Railways and Concor paid Rs 3,000 crore. To make the payment, railway PSU Concor had to liquidate its investment and borrow Rs 700 crore as working capital loan from banks. 

Concor said in its financial statement that it entered into an agreement with the Indian Railways to pay Rs 4,500 crore in advance in two instalments towards payment of freight charges for 2019-20 and already paid Rs 3,000 crore as advance rail freight towards first instalment. “Second instalment is likely to be paid in the month of September,” an official said. 

NTPC, on the other hand, is looking at improving its operations and reduce cost through this scheme. NTPC has paid advance to book rakes for transporting coal. Last year, it had paid an advance of Rs 5,000 crore to the Indian Railways when it entered into an agreement with the latter in March 2018. 

“As a result of priority allocation and movement by the Railway, there was an increase of 22 per cent in the coal railway rakes at NTPC’s railway sidings. NTPC also saved Rs 375 crore in 2018-19 due to extension of advance freight payment agreement, which insulated NTPC from the freight rate hike of the railways done in November 2018,” said an NTPC official. 

The company said this insulated it from coal shortage due to availability of rakes, resulting in 77 per cent reduction in annual fixed cost loss at its thermal units in 2018-19 over 2017-18. This reduction became possible due to increased coal transportation to NTPC plants, said the executive. During the financial year, railway freight earnings increased by around 9 per cent from Rs 1.17 trillion to Rs 1.27 trillion during 2017-18. Similarly, passenger revenue also increased from Rs 48,643 crore in 2017-18 to Rs 51,066 crore in 2018-19. The total earnings were also seen at a record Rs 1.9 trillion. By the end of 2018-19, the railways made highest ever capital expenditure of Rs 1.33 trillion, compared to Rs 1.02 trillion in 2017-18. 

“In addition to this, our passenger and freight earnings, too, improved in the last quarter. Improved expenditure management also helped us bring down the operating ratio,” said a government official close to the development. 

For 2019-20, the interim Budget had kept an ambitious operating ratio of 95 per cent. 

In terms of operating ratio, the seven zones, that are below 100-mark include East Coast (53.1 per cent), South East Central (55.9), Western Central (66.2), North Central (69.1), South Eastern (74.6), South Central (80.7) and East Central (99). The most loss making zones included Kolkata Metro (253.6), North Eastern (207) and Eastern (188).

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