Railways faces CAG heat on passenger fare, deteriorating operating ratio

Indian Railways | Representative Image
The Comptroller and Auditor General (CAG) in its report said on Tuesday that the operating ratio of Indian Railways during the financial year 2016-17 would have further deteriorated to 99.54 per cent against the reported 96.5 per cent, had the actual amount of Rs 400.25 billion towards pension payments been incorporated in its accounts instead of Rs 350 billion. 

Batting for a passenger fare hike, the report criticised that there is hardly any justification for not fully recovering the cost of passenger services in case of AC 1st Class, First Class and AC 2-Tier.  “Operating Ratio of 96.50 per cent does not reflect the true financial performance of the Railways,” said the report tabled before Parliament. It added that had the additional expenditure on pension payments of Zonal Railways been appropriated, the total gross working expenditure of Railways would have increased by Rs 50.25 billion to Rs 1.64 trillion leading to a higher operating ratio of 99.54 per cent.  

Even without this, the Operating Ratio during 2016-17 had deteriorated to an all-time low since 2000-01, when it was 98.34 per cent. Operating ratio represents railway spending over its expenditure or what it spends to gain every Rs 100. This is considered to be an indicator of the efficiency in operations of IR. The Operating Ratio was 90.49 per cent in 2015-16. 

“Since, Operating Ratio is a direct indicator of the working of Railways; the Ministry of Railways should also look into the various innovative ways for revenue generation and closely monitor the expenditure,” the report said. In its recommendations, it further added that Railways needs to revisit the passenger and other coaching tariffs so as to recover the cost of operations in a phased manner and reduce its losses in its core activities.

“The fixation of passenger fare and freight charges should be based on the cost involved so that it brings both rationality and flexibility in pricing considering the financial health of Railways and the current market scenario,” it added.   

It said the non-availability of sufficient funds in Depreciation Reserve Fund to replace the over aged assets is indicative of weak financial health of Indian Railways.  “The huge backlog of renewal and replacement of over aged assets in railway system needs to be addressed for safe running of trains,” it said.  

The report highlighted that total revenue receipts increased by only 4.57 per cent, which was significantly below the Compound Annual Growth Rate (CAGR) of 14.86 per cent during the period 2011-15. The growth of freight earnings was 3.23 per cent in 2015-16, which was below the CAGR of 15.01 per cent registered during 2011-15. The growth of passenger earnings was 4.96 per cent in 2015-16 which was also below the CAGR of 14.31 per cent registered during 2011-15, the report added.

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