NEWS The Railways are in the midst of an unprecedented financial distress and are faced with fundamental organisational issues. This is no time for evasiveness and obfuscation but for clarity and transparency. It is also time to confront reality.

FALSE PICTURE PORTRAYED

• Recent public statements about the performance of the Railways on the freight front suggest that all is well with the Railways.
• In a recent interview, the CEO and Chairman of the Railway Board highlighted the fact that freight loading in January 2021 was the highest ever.
• A recent press report says that the freight earnings in 2020­21 are likely to be more than in 2019­20 despite the COVID­19 pandemic.

NEED FOR A PROPER PERSPECTIVE TO ANALYSE THE PROBLEM

• The freight earnings, which during the entire year are projected to be ₹1,24,184.00 crore in the Revised Estimates for 2020-­21 is lower than what was achieved in 2018-­19 (₹1,27,432.72 crore). In fact, the passenger and freight earnings in 2019-­20 were less than in 2018­-19, indicating that a downslide had started even before the outbreak of COVID­19, probably due to the economic slowdown.
• The Operating Ratio (OR), which is broadly the ratio of working expenses to revenues, has been artificially kept below 100% by making less than required provision for pension payments during 2019­-20 and 2020­-21. While the official figures of OR are 98.36% for 2019­-20 and 96.96% for 2020-­21, the actual OR works out to 114.19% and 131.49%, respectively, if the required provision is made for pension payments.

Thus, it is clear that technically, the Indian Railways are well and truly in the red.

IMMEDIATE CHALLENGES

1. Increase in staff costs and pension payments: while the passenger and freight revenues increased by 84.8 % from 2010­ 11 to 2019­20, the staff and pension costs raced ahead at almost double that rate, by 157%, in the same period.

• Further, while in 2010­11, the staff plus pension costs formed 55.7% of the traffic earnings, by 2019­20, they had shot up to 77.5% of the traffic earnings. This, despite the fact that there has been a reduction of about one lakh staff on roll during this period.
• The spike in the staff and pension costs is largely attributable to the implementation of the Central Pay Commission recommendations, a 10­yearly feature.
• Further, being a Ministry of the Government of India, the Indian Railway’s finances are bound to be subjected to another fatal body blow by the next (Eighth) Pay Commission around 2025-­26.

2. Skewed product mix of freight: A disturbing feature of freight traffic is the overwhelming dependence on one commodity- coal. Despite all the marketing efforts over the years, almost 50% of freight earnings are contributed by the transport of coal.

• But with the availability of alternative sources of renewable energy such as solar at competitive prices, the dependence on coal-based thermal power plants is bound to reduce to meet the incremental energy needs.
• Also, India’s commitment under the 2015 Paris Agreement would result in India reducing its dependence on coal-based power plants. This does not augur well for the Railways and it will have to therefore think seriously of life after coal.

WAYFORWARD

• There is an urgent need to achieve a quantum jump in revenues, particularly on the freight front, with already undergoing drastic reduction in the number of employees, there being no way to reduce the number of pensioners in the short run.
• The full commissioning of the two Dedicated Freight Corridors (DFCs), slated to be operational by 2022,can play a significant role in doing so.
• Further, promoting the adoption of the roll­on roll­off model of transporting loaded trucks on rail on the DFCs. This model not only boosts revenues, but also adds the advantage of reducing the overall carbon footprint.
• Suggestions such as corporatizing the Railways’s Production Units and outsourcing the medical services can help in reducing staff costs and pension payments.
• The government needs to firm up its policies on these crucial issues after discussions with all stakeholders.
• An annual report called ‘Indian Railways Report’ on the lines of the annual Economic Survey should be placed in Parliament every year detailing the physical and financial performance of the Railways, identifying the challenges and plans for the future to meet the country’s rail transport needs. This will ensure public scrutiny.

Reference:

1. https://www.thehindu.com/opinion/op-ed/railways-and-a-question-of-transparency/article34013948.ece