Poor performance! Indian Railways records worst operating ratio in 10 years, notes CAG report

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December 3, 2019 12:54 PM

The operating ratio is a measure of expenditure against revenue, which shows how efficiently Indian Railways is operating and how healthy its finances are. A 98.44% operating ratio means that the national transporter spent an amount of Rs 98.44 to earn Rs 100.

indian railwaysThe audit analysis of Indian Railways’ finance accounts showed a declining trend of revenue surplus as well as the share of internal resources in capital expenditure.

Worst operating ratio for Indian Railways! The national transporter recorded an operating ratio of 98.44% in the financial year 2017-18 which is the worst in the previous 10 years. This was stated by the Comptroller and Auditor General (CAG) in a report tabled in the Parliament on Monday. The operating ratio is a measure of expenditure against revenue, which shows how efficiently Indian Railways is operating and how healthy its finances are. A 98.44% operating ratio means that the national transporter spent an amount of Rs 98.44 to earn Rs 100. The CAG stated that instead of a surplus of Rs 1,665.61 crore, Indian Railways would have ended up with a negative balance of Rs 5,676.29 crore, if not for the advance received from NTPC and IRCON, according to a PTI report.

The auditor said that the exclusion of this advance would otherwise have increased the operating ratio to 102.66%. The national transporter has also been unable to meet its operational cost of passenger services as well as other coaching services. In order to compensate for the loss on the operation of passenger and other coaching services, nearly 95% of the profit from freight traffic was utilized, the report by CAG stated.

The audit analysis of Indian Railways’ finance accounts showed a declining trend of revenue surplus as well as the share of internal resources in capital expenditure. According to the report, the net revenue surplus reduced by 66.10%, from an amount of Rs 4,913.00 crore in 2016-17 to Rs 1,665.61 crore in the financial year 2017-18. Also in 2017-18, the share of internal resources in total capital expenditure decreased to 3.01%. This led to greater dependence on Gross Budgetary Support as well as Extra Budgetary Resources, the auditor said.

Also, in order to augment the internal revenues, the auditor suggested that Indian Railways need to take steps so that dependence on gross as well as extra-budgetary resources is contained. The CAG report further stated that provisioning for depreciation results in piling up of ‘throw forward’ of works concerning the renewal of over-aged assets. The auditor claimed that there is an urgent need to address this backlog as well as to ensure timely replacement and renewal of old assets. The auditor also advised the national transporter to avoid creating new funds without any justifiable reason.

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