What is the Operating ratio?
- Operating ratio measures expenses as a proportion of revenue or the amount spent on every rupee earned.
- A measure of expenditure against revenue, the operating ratio shows how efficiently the organisation is operating and how healthy its finances are.
- For example: An operating ratio of 98 per cent means that the organisation spent Rs 98 to earn Rs 100.
- Lower the ratio, the healthier are railways’ finances.
What are Extra Budgetary Resources?
- Extra Budgetary Resources (EBR) are those financial liabilities that are raised by public sector undertakings for which repayment of the entire principal and interest is done from the Central Government Budget.
- Apart from budgetary spending, EBRs have also been mobilized to finance infrastructure investment since 2016-17.
- These EBRs are not taken into account while calculating the Fiscal Deficit.
- However, they are considered in the calculations of Government Debt.
- The Union Budget 2020-21 proposes to raise EBR of Rs 57,004 crore in 2019-20 BE which is 0.27 per cent of GDP.
Why in News?
- A recent Comptroller and Auditor General (CAG) report tabled in Parliament held that the Ministry of Railways had resorted to ‘window dressing’ for presenting the working expense and operating ratio for 2018-19 in a better light.
- The CAG noted that against the target of 92.8% in the Budget Estimates, the operating ratio of railways was 97.29% in FY19. This means railways spent ₹97.29 to earn ₹100. This, however, is an improvement from FY18’s 98.44%, the worst in ten years.
- The CAG added that the Ministry of Railways resorted to Extra Budgetary Resources (EBR) for project financing 2015-16 onwards.
- It also added that inefficiency of zonal railways and weak monitoring by the Railway Board led to slow progress in projects that were to be completed during 2015-20.