Operating ratio down a notch on freight rate mix

The railway budget has surprisingly revised the transport behemoth’s operating ratio projections for this fiscal down to 92.1% from the budgeted 92.3%.

Operating ratio is the amount spent by the railways to earn every Rs100.

For 2011-12, the ministry wants to bring the ratio lower by another 1%.

Top officials contend that it is possible to helm the operating ratio spike through careful freight rate mix.

Asked how the railways managed to handle the operating ratio even though the budget lowered the freight loading target for the current fiscal by 20 million tonne, Railway Board chairman Vivek Sahai said, “The product mix we decided to pick up was the key.

We found that people were importing coal and carrying it to very long destinations. We realised that there was margin in power generation, that’s why the companies were able to import coal from countries like Australia, South Africa and Indonesia and carry from ports to further down 1800 km distances. We did some rationalisation. We increased freight charges by 4-5 paisa per kg for destinations beyond 500 km and through that change in freight charges, we could earn some Rs1,700 crore extra since September.”

The same is true on the passenger front as well. “During the Gurjar agitations, we changed the routes of the trains during those days, taking the capacity utilisation of our trains to 253%. During severe winters, we did not cancel too many trains. We ran the trains 8-10 hours late, but this saved us from losing revenue. That is how we were able to maintain a healthy earning. We got a growth of 7% in passenger traffic in January,” Sahai added.

For the railways, however, operating ratio is still a matter of concern as the actual for 2009-10 stands at 95.3%.
Experts see this as a bad sign.

“The high operating ratio of 95% shows perilous health of railway finances, which requires immediate attention. By not changing the passenger tariffs, it will be difficult for railways to generate targeted Rs14 lakh crore investment by 2020,” said Abhaya Agarwal, ED and PPP leader, Ernst & Young.

Meanwhile, the gross traffic receipts targeted for 2011-12 are at Rs1,06,239 crore, from which the ministry plans to earn a net revenue of Rs11,993.13 crore. After accounting for dividend payable to the general reserves worth Rs6,734 crore, the railways looks at earning an excess of Rs5,258 crore in 2011-12. As per the revised estimates for 2010-11, the railways plans to earn Rs94,840 crore, a notch above the budgeted Rs94,764.95 crore.

Meanwhile, the railway budget has presented the highest ever plan expenditure to be invested in a single year at Rs57,360 crore.

The plan is proposed to be financed through budgetary support of Rs20,000 crore, diesel cess of Rs1,041 crore, internal resources of Rs14,219 crore and market borrowings of Rs20,594 crore through Indian Railway Finance Corporation. An additional amount of Rs10,000 crore will be raised this year through tax-free bonds, for financing select capacity enhancement works.

Railways will ensure servicing this debt of tax-free bonds.