Tackling the Indian Railways’ Revenue Conundrum

It is high time that the Indian Railways is able to generate enough resources to funding infrastructure development projects to reduce dependence on central government for funds. Its present financial condition is so pathetic that without the central government’s support, it is unable to increase capital outlay. In fact, it requires 95 per cent budgetary support to increase its capital outlay by five per cent as announced in the interim budget recently. The Indian railways has found itself in such a position as it has and continues to ignore freight traffic, the main source of revenue earning. As a result, the operating ratio of the railways has drastically dropped from 98.7 per cent from 90.8 per cent, in a decade. Operating ratio refers to the expenditure incurred by the railways against every rupee it has earned as revenue. The figure clearly indicates that the Indian Railways is incapable of allotting funds for upgrading its present network, and is also finding it difficult to continue its regular operations.

Many have argued that the health of the Indian Railways has deteriorated due to the huge burden of salary and pension bills. While the above mentioned fact may be partially true, the major cause of railways’ poor economic health is different. For years, the Indian railways has paid more attention to passenger traffic, than goods traffic. For instance, a number of new trains have been introduced over the years, which in turn has congested the tracks. To remove the bottleneck, passenger trains have been given preference over goods trains, keeping passenger comfort and safety in mind. With goods train services regularly getting delayed, businesses have started opting for road transport in place of railways. It should be noted that while the railways subsidised passenger fares, it offered no concession to goods transportation. Rather, often the railways have increased freight charges to manage the deficit. To control the damage, it took up an ambitious plan to construct dedicated freight corridors in the nineties, a project which has not yet been completed.

In-order to improve its financial health, the Indian railways must work towards increasing freight revenue as much as possible. To achieve this objective, it should decongest the railway tracks at the earliest for smooth movement of goods traffic. At the same time, the unfinished work of the dedicated freight corridor should be completed on a war footing. The project has been pending for more than three decades and any further delay in completion of the project will make it redundant. Moreover, the railways should offer some concessions for freight transport to be more competitively priced against other modes of transport. There is nothing wrong in serving the people by offering them subsidised travel fares. But simultaneously, it is also important to take care of the financial health of the railways. Otherwise, both the passenger and freight services of the Indian Railways will be severely affected, creating enormous hardships nationwide.