Apr 20, 2018

Wage & Pension Burden Hits Railways Operating Ratio



A Rs 20,000-crore spike in salary bill and pension liability has hit the Indian Railways hard in the last fiscal, pushing the national transporter’s operating ratio deeper into the red.

The railways is expected to report an operating ratio, a measure of its performance, of about 98.5% in FY18, against the revised 96% announced in the February budget. The operating ratio indicates how much railway spends to earn a rupee.

An operating ratio of 98.5% means that railways is spending 98.5 paisa to earn 100 paisa (Rs 1), leaving it with negligible surplus. Therefore, lower the operating figures, better the performance. A senior railway official said the higher salary and pension liability because of the full implementation of the seventh pay commission dented its finances.

Besides, less than expected revenues from monetisation of assets and dividend from PSUs going directly to the finance ministry after the merger of budget worsened its situation.

“If you see in terms of fare revenue, we have done as per budget estimates. In freight, we have met the targets. Whereas, in passenger, we were just short by Rs 2,000 crore,” the official said. The railways decided not to pass on the cost to passenger and freight customers, as retaining passenger numbers was equally important and railways wanted to be an economical mode for the common man, the official said.

Railways is currently burdened with Rs 33,000 crore of passenger subsidy. “40 lakh senior citizens have already given up the rail subsidy by opting for full price tickets. We’ll strengthen the ‘give it up’ subsidy campaign to reduce the losses because of subsidy further,” the official said. The total salary bill increased by approximately Rs 10,000 crore to Rs 1.18 lakh crore, while pension liability rose from Rs 35,000 crore to Rs 45,795 crore in FY18.

The official said that railways couldn’t meet its land monetisation and commercial exploitation target of Rs 20,000 crore as the realty market wasn’t upbeat. Only Rs 10,000 crore could be realised from the non-fare revenue box. The merger of rail budget with the general union budget has also impacted the revenues for the railways as the dividend which it used to get from its PSUs is now going directly to the finance ministry. “It’s a loss of Rs 1,400 crore annually,” the official said.

The operating ratio has been hovering above 90% for the last six years. In 2013-14, it was close to 94%. The last time railways reported an operating ratio of 98% was in 2000-2001. Globally, an operating ratio of 80% or below that is considered healthy as it allows railways to invest through its own resources in capacity expansion and modernisation.

The official said that railways was now working towards meeting the targets for the current year. The operating ratio target for the current year has been set at 92.8%. Railways has set the target to bring down its operating ratio to 88% by 2022 by undertaking only financially viable projects.

Source: ET