Higher freight rates boost earnings for Railways ahead of budget

Declining passenger volumes remains a concern for the Indian Railways

Indian Railways has registered a 12.6% jump in total earnings at Rs 128,928 crore in the April-January period current fiscal helped largely by higher freight rates even as its passenger business continues to struggle to wriggle out of a historic decline in volumes.

The trend, coming ahead of the Rail Budget 2015-16, highlights the issues faced by railways in attracting more passengers who are fast opting for other competitive modes of transport including roads and air travel. At the same time, higher freight rates have led to moderate growth in freight volumes.



Total freight earnings grew 12.3% to Rs 87,291 crore between April and January this fiscal as compared to Rs 77,694 crore in the same period last fiscal. The ministry has not released the official figures for freight volumes for January. Volumes grew by a mere 5% in the April-December 2014 period.

Freight earnings accounted for over 65% of Indian Railways total earnings of Rs 144,167 crore in 2013-14. Indicating a slight revival in commodities transport, freight's share in total earnings has risen to 68% n the April-January period as compared to 64% budgeted for the full fiscal year (2014-15) at the time of the Rail Budget presentation in June 2014.

Railways’ freight traffic has grown by over 4% annually over the past few years to reach 1,051 million tonne last fiscal. In the current fiscal till December, freight tonnage grew by 5% to 808 million tonne. However, thanks to the cross subsidization of passenger fares by higher freight rates, the transporter’s share in the freight market has been clawed by roads.

The rail ministry had raised freight rates by 5.8% in April 2013, 1.7% in October 2013 and 6.5% in June 2014. Also, a congestion surcharge of 10% is being levied on all goods traffic including containers originating from ports since November 2014. Passenger fares were hiked by 5% in June 2013, 2% in October 2013 and 14.2% in June 2014.

Railways’ passenger volumes dipped 0.5% to 6,923 million in April-January period current fiscal. However, its earnings from the passenger business grew 5.4% to Rs 35,309 crore. Overall, the continued double-digit growth in total earnings comes at a time the ministry is struggling to achieve the current fiscal’s budgeted Operating Ratio (money spent to earn Rs 100) of 92.5% as against 90.8% recorded last fiscal.