Despite a year-on-year growth, freight and passenger earnings fell short of target in the first nine months of this fiscal
The Indian Railways (IR) has once again fallen short of its earnings target in the first nine months of this fiscal (FY19) despite witnessing a healthy year-on-year increase. It has been missing the earnings target each year since the past three years, and the national transporter has maintained this dubious tradition in the current fiscal year so far.
According to the latest data, earnings from freight were short by Rs 6,182 crore till December despite a year-on-year growth of over 3%. Even if one were to include earnings from NTPC for carrying its coal (which have been taken in advance), the shortfall still stands at Rs 173 crore in the nine-month period despite a year-on-year increase of more than 10%.
And earnings from passengers were short by Rs 800 crore between April and December this year despite an over 5% on-year increase. In all, gross earnings from all sources (freight, passengers, coaching and sundry sources) were short by Rs 11,156 crore (excluding NTPC) despite an increase of almost 4% Y-o-Y. Gross earnings were short of target by around Rs 1,240 crore each month or a little over Rs 40 crore, on an average, each day of this fiscal till December.
In a written reply in Lok Sabha last week, MoS Railways Rajen Gohain acknowledged that the IR has seen earnings fall short of Budget target for the last three fiscal years and also in the current year till November. "Earning shortfall against Budget proportionate in passenger is due to drop in non-suburban non-PRS (non-reserved) passengers, and goods mainly due to adjustment of the freight advance taken in 2017-18," he said on the shortfall.
Gohain's reply showed that in case of passenger earnings, the shortfall has been about Rs 1,100 crore from the revised estimated in 2015-16, which went up to about Rs 1,700 crore next fiscal, then came down slightly to about Rs 1,500 crore in 2017-18 and, as explained earlier, for the nine months ending December this fiscal it stands at about Rs 800 crore.
The inability of the IR to meet its earnings targets year after year is perhaps due to inordinate ambition and partly because of its skewed fare policies. First, the IR earns almost 65 paise of every rupee through freight but a systematic increased in freight rates over the last few years had rendered freight carriage by railways uncompetitive compared to other modes of transport like roadways. This meant a decline in freight earnings. This skew was corrected in 2016-17 when freight rates were rationalised, but again rates for some commodities were raised earlier this fiscal. Two, the IR subsidises passenger travel through freight earnings and this means each passenger is being transported at a loss.
A former chairman of the Railway Board said on condition of anonymity that this 'social service obligation' of the IR is upwards of Rs 40,000 crore each year – this is the amount by which passenger fares are subsidised. Inability to raise passenger fares and making freight rates uncompetitive is adding to the IR's financial woes, the chairman said, adding there was a need to raise passenger fares.
But missed earnings are not only due to skewed policies on passenger and freight fares. On other heads too, the IR has been faring poorly. The latest data shows 'Sundry' earnings were less than half the target in the nine-month period. This refers to earnings from non-fare revenue sources like advertisements.
It is interesting to see that the significant gap between earnings target and actual earnings for the nine-month period does not hold true if we consider numbers for just the month of December. Last month, passenger earnings breached the monthly target while freight earnings narrowed the gap from the target, against comparisons with the nine-month period. So, December has been a happy month for IR, as healthy growth in reserved category passengers bumped up earnings from the passenger segment. As for freight, earnings (including NTPC) comfortably crossed the target but excluding that, it fell short by about Rs 576 crore.
For 2018-19, IR's total earnings target is a little over Rs 2 lakh crore, which means it has to generate incremental revenue of almost Rs 22,000 crore by the end of this fiscal over the previous fiscal. IR has been eyeing about Rs 10,000 crore additional earnings from freight compared to last fiscal but even if this is achieved, that still leaves a gap of Rs 12,000 crore. Now that public pressure has forced IR to dilute even the flexi-fare scheme, generation of these additional earnings looks difficult and the transporter will likely close the year with yet another shortfall versus the target set out in the Budget.
ON SLOW TRACK
Container loading in Indian Railways (In Million tonnes)
46.19 – 2015-16
47.60 – 2016-17
54.31 – 2017-18
39.41 – 2018-19
(upto Nov.18)
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Gohain's reply showed that in case of passenger earnings, the shortfall has been about Rs 1,100 crore from the revised estimated in 2015-16, which went up to about Rs 1,700 crore next fiscal, then came down slightly to about Rs 1,500 crore in 2017-18 and, as explained earlier, for the nine months ending December this fiscal it stands at about Rs 800 crore.
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