Social cost runs past Railways' growth

Railways bore losses of Rs 34,345 cr in FY15 due to its social obligation to provide cheaper services

If you thought the National Democratic Alliance (NDA) government would act differently as compared to the previous United Progressive Alliance (UPA) regime when it comes to managing Indian Railways’ loss-making social service obligations, you need a rethink.

Fresh data released as part of the rail budget on Thursday indicates railways outgo on net social service obligation in the current financial year (2014-15) stood at Rs 25,912 crore – 16.2 per cent of its total traffic earnings. The share is not just the highest in the past nine years, the outgo on social service has grown faster than railways revenue, just as it did in UPA regime.


While the overall traffic earnings of Indian Railways have grown by 67 per cent from Rs 94,840 crore in 2010-11 to Rs 159,248 crore in the current financial year, net social service obligation — the overall losses incurred on running services below operating cost — grew 93 per cent to Rs 25,912 crore during the five-year period.

The Cost of Railways' Social Face
	Net Social Service Obligation	Traffic Earnings	Social Spend (%age of Earnings)
2010-11	13,365	94,840	14
2011-12	16,620	103,917	15.9
2012-13	18,696	125,680	14.8
2013-14	21,391	140,499	15.2
2014-15	25,912	159,248	16.2
Figures in Rs cr; Source: Rail Ministry

According to the ministry, Indian Railways is estimated to have suffered total losses of Rs 34,345 crore in the current financial year on account of its social obligation to provide cheaper services. This includes Rs 34,297 crore lost on coaching services covering suburban and non-suburban passenger traffic, parcel and luggage and an additional Rs 47 crore on carrying essential commodities below cost of operation.

Losses on account of carrying fruit and vegetable consignments at concessional rates worked out to Rs 34 crore and the rest on bamboo, charcoal, cotton and sugarcane. Staff welfare cost and law and order cost of Rs 8,433 crore were deducted from the overall “social” losses by the ministry to arrive at the net loss figure of Rs 25,912 crore for 2014-15.

The railways also suffered a huge Rs 1,681 crore of losses on account of 90 economically unviable branch lines. All narrow gauge lines and lines that join the main line network only at one end are termed as branch lines. Losses on account of running these lines were reported at Rs 1,400 crore last year. Several high-level committees have recommended the closure of these unviable lines in the past to reduce the losses to railways every year. However, state governments are reluctant to close these lines.