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Rlys might not meet operating ratio target

The operating ratio is a parameter that measures financial performance for an organisation

Sudheer Pal Singh  |  New Delhi 

The Indian Railways might find it difficult to meet the current financial year’s operating ratio target of 92.5 per cent as growth in total earnings between April and January 2014-15 has fallen short of the target. This, despite the Rs 5,000-crore benefit from lower fuel cost and an upswing in the freight earnings.

The operating ratio is a parameter that measures financial performance for an organisation..

Read our full coverage on Union Budget Railways’ gross traffic receipts were budgeted to grow at 13.9 per cent to Rs 1,60,165 crore in the current financial year. This included a projected 11.7 per cent growth of freight earnings to Rs 1,05,770 crore and 19 per cent growth in passenger earnings to Rs 44,645 crore.

However, in the 10 months between April and January, total earnings have grown by only 12.6 per cent battered by sluggish growth of the passenger segment. Revenue from passenger service, which suffers from declining trend of volumes, grew only 14.9 per cent against the targeted 19 per cent. The impact was marginally offset by freight earnings, which grew 12.3 per cent in the 10 months.

The less-than-expected growth of earnings comes amid rising power cost for the national transporter, which partially eroded the gains from a Rs 5,000 crore savings on diesel cost, and a huge salary bill for the transport sector behemoth. While presenting last year’s rail Budget, the then rail minister, Sadananda Gowda, had changed the operating ratio target to a more realistic 92.5 per cent from 89 per cent set by the previous United Progressive Alliance regime in the interim Budget.

Hard-pressed for funds, Rail Minister Suresh Prabhu is likely to ask for a gross budgetary support (GBS) exceeding Rs 50,000 crore from the finance ministry in this year’s Budget, compared to last year’s Rs 30,000 crore GBS, said a ministry official.

“We receive around a half of the GBS we ask for every year,” he said. The ministry had earlier said 359 projects that were announced earlier and requiring Rs 1,82,000 crore were yet to be completed.

However, Prabhu is unlikely to announce any big-bang step to tinker with passenger fares or freight rates in line with his earlier comment that the ministry’s primary priority was improvement in amenities.

Passenger fares were last increased by 14 per cent in June last year along with a six per cent rise in freight rates. The minister had said he wanted to focus on non-traditional sources of funds including advertisements and capitalising on the railways’ mega land bank.

The budget is also likely to have initiatives for manufacturing of coaches to run at 200 km an hour speed at railways’ Chennai facility in line with the Modi government’s ‘Make in India’ initiative, apart from measures to rope in domestic and foreign direct investment in projects. Prabhu will also announce a joint venture mechanism for implementing projects involving state governments and other external agencies.

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First Published: Thu, February 26 2015. 00:50 IST