Railways needs to be more transparent and scientific in its forecasting

It has been projecting the same no. of travellers for all classes though it has never breached those targets

Given the ebbing of Covid-19 cases in February 2021, the government was expecting the national service to pull off a turnaround. The second wave of infections derai­led the Railways’ plans, however. Last year, the Railways projected that the carrier would rake in Rs 61,000 crore from passenger services. In this year’s Budget, re­vised estimates show that Ind­ian Railways would only achieve 70 per cent of its target. When actual numbers are ann­ounced next February, there may be a further decline.

Even before Covid-19, the Railways was consistently und­erperforming its budget targets. It budgeted Rs 56,000 crore from passenger services in 2019-20 but could only rake in Rs 50,669 crore. The year before, the shortfall between budgeted and actuals was Rs 933 crore. In fact, in the last six years, Railways has never outperformed its budgeted estimates in passenger earnings (see chart 1).

The growth in passenger revenues has been muted, but that hasn’t stopped the national carrier from projecting higher estimates every year.

A Business Standard analysis shows further problems with the Railways’ forecasting technique. In estimating revenues from passenger services, the service pro­vider evaluates the traffic it would attract each year. The ex­ercise is done for suburban and non-suburban services and acr­oss all classes, such as AC First Class, AC Third class, sleeper and so on. Based on these accounts, Railways analyses how many kilometres will be travelled and how much it would earn.

For the past three or four years, data from Budgets indicates that the Railways has been projecting the same number of travellers each year for all classes, even though it has never breached those targets.

In this year’s budget, the Railways projects that 8,593.79 million people would travel using the service; in the 2021-22 Budget, it projected the same for that year; and its projections for 2019-20 were again for 8,593.79 million using its service (see chart 2).

While it estimated an earning of Rs 56,500 crore in 2019-20 from passenger revenues, in 2021-22, it projected Rs 61,000 crore. And, it expects Rs 58,500 crore from passenger services in 2022-23 despite estimating the same number of travellers in both years. Data indicates that it does not expect the travelled distance to change from 2021-22 to 2022-23 either.

Furthermore, even though it had projected fewer passengers in 2021-22, compared to 2020-21, it had estimated that it would earn Rs 61,000 crore in both years despite the fact it was ferrying fewer people and travelling fewer kilometres (see chart 3).

In contrast, freight earnings do not show such anomalies in forecasting.

The Railways needs to be more transparent and scientific in its forecasting. A paper by Bibek Debroy and Kishore Desai of Niti Aayog in 2015 had showed how the Railways was losing customers to air travel and bus services over the years.

Such analysis needs to reflect in Railways forecasts as well.