Railways Operating Ratio Peaks as Pension and Wage Liability Soars | CORPORATE ETHOS

Railways Operating Ratio Peaks as Pension and Wage Liability Soars

By: | April 20, 2018

April 20: The financial kitty of the Indian Railways is getting further dented as wage and pension liabilities post the seventh CPC implementation has choked the funds of the national transporter. The Railways is said to be reporting an operating ratio of 98.5% in FY18, further narrowing the slender profit.

Railways had earlier revised its operating ratio to 96% during the previous budget session. Operating ratio reflects the spending by railways as compared to an earning of one rupee. In effect, an operating ratio of 98.5% means that the Railways spend 98.5 paisa to earn revenue of 100 paisa. The rise in operating would mean a downfall in the surplus, said a news report.

This is the first time since 2000-01 when the Indian Railways will have the operating ratio soar past 98. According to experts, operating costs would have to be kept below 80% for a prospect of healthy investment in expansion and modernization. The operating costs, however, has been standing well above 90% for the past six years.

Officials have been quoted as saying that the rise in operating ratio has been caused by the higher wages and pension liability due to the full implementation of the seventh pay commission. The total salary increase was around Rs 10,000 crore after the implementation of CPC, while pension liability rose to Rs 45,795 crore from Rs 35,000 crore.

The flow of revenues from monetization of assets and dividend from PSUs to the Finance Ministry due to the merged budget has also attributed to the worsening of the situation. Indian Railways is said to have met the targets it set for the FY18 in freight, but have fell short by around Rs 2000 crore in passenger segment. Additionally, the cost wasn’t passed on to the passenger and freight customers owing to the retention of its customers.

Indian Railways is currently eyeing to ease the finance by reducing the burden of subsidies. The current burden of passenger subsidies stands over Rs 33,000 crore. Around 40 lakh senior citizens have already given up the subsidy on tickets, while Railways will attempt to increase the number by strengthening its ‘give it up’ campaign.