For all its achievements, the railways remains an inefficient performer. Incremental improvements may get it rolling smoother
Releasing a booklet on the railways achievements in the last five years, railways minister Piyush Goyal may have painted a rosy picture, but that does not subtract from its many troubles, chief among which is its worsening operating ratio.
The ratio is of working expenses to traffic revenue, and the lower the value the more efficient the organisation. At 96.5 percent for 2016-17, and an estimated 98.5 percent in 2017-18, Indian railways is on an inefficient track, given that 80 percent is considered efficient the world over for railways, which are capital-intensive. Presenting the interim budget this year, however, Goyal had told parliament that the operating ratio was likely to improve, from 98.4 percent in 2017-18 to 96.2 percent in 2018-19, and to 95 percent in 2019-20.
Railway officials have blamed the bad performance on increased pay and pension outlays, a result of pay commission recommendations. But the Comptroller and Auditor General (CAG), as well as the Observer Research Foundation (ORF) most recently, have pointed to other factors as well.
An ORF paper of February 2019, authored by former chairman of the railway board Vivek Sahai, associated with ORF as distinguished fellow, and Ameya Pimpalkhare, an associate fellow, has said that had cash flows been more conscientiously recorded, the operating ratio would have been well past 100 in 2016-17, and not 96.5 as reported by the railways. It says railway finances were actually in the red, and that window-dressing had helped show improved OR. In this, the ORF paper concurs with the findings of CAG.
The ORF report pointed out the railways share of freight traffic had plummeted to 32 percent in 2012 from 89 percent in 1951. Passenger business, too, had suffered, it said, owing to competition from aviation, growing at over 15 percent for the last four years, besides roadways.
The paper said capital investments had gone tremendously high in recent years but the productivity of assets is not being monitored because of which not many benefits are coming out of it. The productivity of assets means doubling of lines, creation of new lines, better locos, wagons, coaches or financial results. Since the rail budget was merged with the general budget in 2017, a lot of jugglery is going on, points which have already been raised by the CAG.
The ORF report noted that regardless of the 70 percent increase in capital infusion in 2012-17 as compared to 2007-12, the railways’ freight traffic (its bread and butter) grew at a tepid pace of 2.6 percent and the total net tonne-km (NTKM) – the key indicator of freight earnings – clocked a negative growth of 1.47 percent.
In order to understand why the railways was not able to raise revenue, the report analysed four years’ expenses and revenue. From 2012-13 to 2016-17, the expenses have steadily grown at a compound annual growth rate (CAGR) of 9.26 percent. However, its growth in revenue – despite a hike in freight rate and a meagre increase in passenger fare – has lagged behind, at a CAGR of 7.51 percent. The net revenue has consequently plummeted to almost nil.
The report came out with a few suggestions to improve the financial health of the IR. It says the railways must target to enhance the throughput of the system. All investments made into movable and immovable assets must result in better speeds of freight services and increase the average speed of all trains in the IR network.
Experts say that creating more reliable infrastructural assets may help. The research paper underscored that the railways has been facing asset failure issues. In 2016-17, there were 3,546 rail failures, 4,452 locomotive failures (both diesel and electric) and 1,30,197 signal failures on the network. These eat into the existing capacity of the already-congested route. There is urgent need to rein them in.
During the media briefing along with the booklet release, this reporter asked Goyal about his plans for improving the operating ratio. The minister replied that the carrier was aiming to convert diesel locos to electric ones and this would save Rs 13,000 crore. Similarly, with efficiency and improvement in signalling, the railways plan to add 40 percent capacity to move more freight, and this would help improve the operating ratio. He added that Indian railways was no longer facing a dearth of funds, as it did a few years back. “We still have Rs 1 lakh-crore limit from LIC and only a meagre Rs 20,000 crore has been spent by the railways as of now,” he said.
The minister claimed many firsts in 2014-19, emphasising “phenomenal growth rates in recent years” and best ever safety records in 2018-19, which witnessed a 81 percent drop in the number of deaths in rail accidents. Statistics say there were 29 deaths in 2018-19 (till January 31, 2019) as compared to 152 in 2013-14.
One of the biggest achievements, according to Goyal, is the first engine-less semi-high speed train, christened as Vande Bharat express (earlier Train 18), which was rolled out within a record 18 months. It can run at a maximum speed of 180 kmph. However, track conditions restrict its peak speed to 130 kmph. Tracks are being upgraded to facilitate 160 kmph speed on the New Delhi-Varanasi route, flagged off by prime minister Narendra Modi on February 15. He said 130 Vande Bharat trains would be ordered soon.
Goyal also took credit for eliminating unmanned level crossings (ULCs) on the broad gauge network. He said 3,479 ULCs were eliminated in 2018-19 as against 1,137 in 2009-2014. Electrification has also been a priority, with 4,087 route-kms electrified in 2017-18, against 610 route-kms in 2013-14. All broad gauge routes would be electrified by 2022, he said, saving Rs 13,500 crore.
“I am elated that the government has materialised each and every point of the BJP’s manifesto. We believe that the previous governments have had ignored the northeastern parts of the country for long. Developmental works were not carried out with rapid pace. We have converted the entire northeast rail network into broad gauge network and all state capitals there are being connected with each other,” he said.
Asked why IRCTC hadn’t been listed yet, he said it holds a lot of potential and that its database should be leveraged to maximise the value of the listing.
He said a track-laying target of 15.34 kms per day has been fixed for 2019-20 against 6.53 kms per day in 2014-18. Track renewal work has been speeded up, from 2,926 kms in 2013-14 to 5,000 kms in 2018-19. There is also a quantum leap in capital expenditure. The capex of 2014-19 stands at a whopping Rs 5.1 lakh crore as against Rs 2.3 lakh crore of 2009-14.
The centre has pumped huge amounts into the railways to revive its colonial-era infrastructure, which will go a long way in improving efficiency and raising revenues. Hopefully, with that, the operating ratio will also improve.
vishwas@governancenow.com
(This article appears in the march 31, 2019 edition)
