Freight loading by the Indian Railways grew a dismal 1.22% in April-May, far from 7.7% increase projected for the full fiscal, as the tonnage of cement, foodgrains and iron ore declined, reflecting a stuttering economy.
Loading of coal, which makes half of the railway tonnage and slightly less than that of freight earnings, grew 5.45%; though this was stronger than the growth in the loading of the fuel in recent years, it was still shy of the highest ever incremental increase projected in the budget presented by railway minister Suresh Prabhu in February.
That the slow increase in tonnage was not a seasonal phenomenon but a sign of weak core-sector activity (the core sector expansion hit an 18-month trough of -0.4% in April) was evident from the fact that tonnage achieved in April-May was 9.2% less than the transporter’s internal target for the period.
However, thanks to steep hikes in tariff — 6.5% last June and upon that another 5.5% in the latest budget — the railways managed to register a 16.5% increase in the revenue from goods transportation in the first two months of the current fiscal year, compared with 13.5% budgeted. Freight earnings for April-May stood at R19,117 crore compared with Rs 16,405 crore in the year-ago period.
Indicating that the transporter is milking transporters of bulk commodities, the average earnings per million tonnes of goods carried stood at Rs 104.6 crore in April-May, compared with R91 crore in the corresponding period a year ago. The immediate prospects, however, don’t look that bright for it as the lean season (July-October) is now set to commence and another increase in freight rates looks difficult given the state of the economy, analysts said.
Freight rates for 10 commodities were hiked in the range of 0.8-10% (weighted average 5.5%) in the last Budget.
The loading target for the current fiscal is projected to be 1,186 million tonnes, up 85 million tonnes from last year, the largest annual incremental tonnage ever. According rail ministry data, the loading in April-May was 182.72 mt, compared with 180.52 mt in the year-ago period. The tonnage shrank in the case of cement (-9%), foodgrains (-24.2%) iron ore (-4.2%).
According to Rajaji Meshram, director, advisory infrastructure, KPMG, the reason why the freight loading target for April-May was missed by a wide margin is because it was too high. “The budget target for April 2015 was 99.33 mt, while the actual was 88.53 mt. Thus, a shortfall with respect to the budget target was created in the first month of the year itself,” he said.
The railways had set an ambitious Plan size of Rs 1 lakh crore for the current fiscal, up a record 52% over the level last year, relying on new avenues of resources — funds to be mobilised from LIC, long-term debt from pension funds and multilateral agencies, etc — given its limited ability to raise internal resources. Considering the tepid growth in freight traffic, an economic turnaround is crucial for the entity to realise its ambitious capital investment plans.
Despite the hike in freight rates, the heavily skewed nature of the railways’ revenue streams is seen to remain unchanged in FY16, with 66% of its gross traffic receipts coming from freight, as against just 27% from passenger earnings (the earnings/cost ratio is 49.4% for passenger fares and 163.7% for freight, reflecting the untenable level of cross-subsidy).
The railways’ freight earnings for 2015-15 is budgeted to be Rs 1.2 lakh crore, up 13.5% from last year.