Among the Indian Railways’ (IR) 17 operating zones, 10 have recently displayed a profitable run, despite the Operating Ratio (OR) being reported at 97 – the worst on record since 2001. The profits made by these 10 zones, however, are being offset by the operating costs of the other 7.
The OR clarifies how much it costs for the Indian Railways to earn a single rupee, and the current OR means that the IR spends 97 paise for every 100 paise (1 rupee) earned. Thus, the Indian Railways currently finds itself in an unfavourable position when it comes to having generated enough funds for further investment, modernization, and development. The central budget allocates funds for the railways to invest, and its high OR among other factors means that it has been short on investible funds for the last few years.
Former member (traffic) at the Railway Board, VN Mathur, says, “Since the passenger segment is heavily subsidised by the freight revenue, the zones witnessing high passenger traffic will have high OR too — for instance, the North-Eastern Zone, as there is no freight movement there.” Lending credence to the theory that the overall functioning of the IR negates its own gains and balances the equation to a near 0 – meaning that the railway network earns enough to run itself, and not much more. The imbalance can be noted by focussing on individual zones or sectors – In 2015-16, the North-Eastern Railway reported their OR as 196.72, but the OR for the entire Indian Railways across India balanced out to 90.5. Consequently, East Coast Railway reported an OR of 50.56 in the same time frame thanks to its primarily freight-transportation activities which don’t require as much administration and running expenditure as passenger-transportation does.
The Indian Railways finds itself in a bit of a Catch 22 situation. Higher passenger numbers directly mean higher profits, but it also means having to hire more staff for cleaning, security, etc. which raises the operating cost.
The Indian Railways has been looking into alternative sources of revenue, such as the ambitious Railway Display Network (RDN) which aims to set up over 2 lakh screens across India’s railway stations to generate advertising revenue in addition to providing passenger information services.