Indian Railways to report its worst-ever operating ratio; is 7th Pay Commission the reason?

By: | Updated: April 20, 2018 12:44 PM

Operating ratio indicates the organization/company’s operating expenses divided by its operating revenues, which helps to check its performance. Similarly, in Railways, the term refers to the sum which the transporter spends in order to earn a rupee.

Indian railwaysDespite efforts by Indian Railways, the national transporter may record its worst operating ratio at 98.5 per cent in year 2017-18.

Worst Operating Ratio for Indian Railways in years! Despite efforts by Indian Railways, the national transporter may record its worst operating ratio at 98.5 per cent in year 2017-18. According to reports, the operating ratio figure of 98.5, without adjustments would cross the 100-per cent mark. Sources said that the figure is still worse than the Revised Estimate (RE) of 96 per cent. Since year 2000-01, when the operating ratio was of 98.3 per cent, this would be the worst one. An IE report stated that the operating ratio figures will be communicated to the Controller General of Accounts. This time as there was an earnings shortfall of about Rs 8,500 crore against RE, the railway book-keepers have left no stone unturned while working out the operating ratio.

Railway Board Financial Commissioner A K Prasad has been quoted as saying that working expenses have gone up due to 7th Pay Commission. The total pension outgo has been estimated at Rs 47,000 crore. Prasad has also pointed out that every time Pay Commission recommendations have been implemented the operating ratio has gone up. According to Prasad the impact of the 7th Pay Commission is roughly Rs 22,000 crore every year.

Operating ratio indicates the organization/company’s operating expenses divided by its operating revenues, which helps to check its performance. Similarly, in Railways, the term refers to the sum which the transporter spends in order to earn a rupee. The report stated that, in order to lower the ratio below the 100-per cent mark, the biggest contribution was an advance earning of Rs 5,000 crore from NTPC on the last day of the last fiscal for freight to be carried in 2018-19. However, the figure is shown in revenues of year 2017-18, giving an elbow room to the railway book-keepers.

Also, at the end of the last fiscal, around Rs 2,000 crore was taken from one rail PSU, apparently for monetization of a railway land in the future. Additionally, payment of around Rs 4,000 crore of principal component on lease charges has been shown to be paid from Gross Budgetary Support as opposed to from railways revenues, which is the norm. The national transporter also failed to put its share of money in Rashtriya Rail Sanraksha Kosh (RRSK), which is a crucial safety fund, where the central government pays Rs 15,000 crore and the transporter is supposed to pay Rs 5,000 crore from its own earnings. Therefore, the national transporter is able to appropriate only around Rs 1600 crore of its share to the fund, the report stated.

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