The Parliamentary Standing Committee on Railways expressed its displeasure with the Indian Railways over its mounting loss. In the financial year 2021-2022, Indian Railways recorded a loss of ₹15,024.58 crore. The committee observed a drastic fall in net revenue over the last five years, indicating internal deficiency in the overall planning and management of railways. The railways stated that the losses are due to a steep rise in staff costs after the implementation of the seventh pay commission in 2017-18 and 2016-17. The impact of the pandemic also affected the sector adversely in the year 2019-2020 and 2020-2021, making it harder to enhance revenue.
Reasons for the loss
The steep rise in staff costs and the impact of the pandemic have led to a fall in the net revenue of Indian Railways. Staff costs have risen after the implementation of the seventh pay commission. The impact of the pandemic has affected the sector adversely in the year 2019-2020 and 2020-2021. These events adversely affected the efforts of railways to enhance revenue.
Fall in revenue
The parliamentary committee expressed concern over the drastic fall in the net revenue of the Indian Railways. The revised estimates have been reduced by more than 50%, and actuals were far behind revenue estimates. Even after continuous support through budget allocation and extra-budgetary resources, railways are not able to generate resources internally.
Operating ratio
The committee noted a high operating ratio, which reached 107.39%, the highest ever in 2021-22. The operating ratio is a measure of how much the Railways is spending to earn a rupee, and a low operating ratio is considered financially healthy. The committee also noted that the ever-growing social obligations of the Railways led to high operating ratios.
Recommendations of the Parliamentary Committee on Railways
The parliamentary committee gave a series of recommendations to improve profitability. The committee recommended that the Railways should constitute remedial measures to plug leakages, arrest the declining trend of net revenues, and find ways to improve railways’ revenue. The committee also suggested several non-fare measures to raise revenue, such as advertisements or hoardings at railway stations, trains, bridges, and other assets. The monetisation of surplus railway land and setting up ATMs at railway stations were also suggested.
Indian Railways’ plans
Indian Railways aims to reverse the loss-making trend and has set a net revenue target of ₹2,393 crore for the financial year 2022-23. The Railways also reported that the effects of the pandemic are over and aims to decrease the operating ratio to 98.22% in FY2022-23. The Indian Railways is also undertaking works to improve capacity, such as the dedicated freight corridor, doubling/quadrupling of railway lines, electrification of railway lines, ring-fencing allocation for ongoing last-mile projects, and priority projects for early completion to enhance traffic throughput and increase revenues.
Why In News
In March 2023, the parliamentary standing committee on railway expressed its displeasure with Indian Railways over its mounting loss. The committee highlighted concerns over the inefficient internal planning and management of the railways, resulting in the inability to generate resources internally despite budget allocation and extra-budgetary resources.
MCQs on Factors Contributing to the Losses of Indian Railways
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The parliamentary standing committee on railway expressed concern with the drastic fall in the net revenue of Indian Railways by how much in the financial year 2021-2022?
A. ₹15,024.58 crore
B. ₹10,000 crore
C. ₹20,000 crore
D. ₹5,000 crore
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What is the operating ratio of Indian Railways in the financial year 2021-22, as per the parliamentary committee report?
A. 107.39%
B. 95%
C. 100%
D. 90%
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What measures did the parliamentary committee recommend to improve the profitability of Indian Railways?
A. Remedial measures to plug leakages, arrest the declining trend of net revenues, and find ways to improve railways’ revenue.
B. Increase the number of trains
C. Provide free Wi-Fi to passengers
D. Reduce fares by 50%
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What is the net revenue target set by Indian Railways for the financial year 2022-23?
A. ₹2,393 crore
B. ₹5,000 crore
C. ₹10,000 crore
D. ₹1,000 crore
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