Indian Railways Crawls on Slow Lane Amid Economic Slump

The performance of Indian Railways has been affected by the economic slowdown with the demand for wagons falling sharply amid the fall in earnings from goods and passengers.

The national transporter had earlier set a target of procurement of about 10,500 wagons which was reduced to 5,000 after a review of the prevailing situation and has further revised it to 1,860 at present due to the absence of demand.

As the railways are dependent on the market for its wagons, the drastic reduction in procurement has led to the market taking a hit of more than Rs 4,000 crore.

According to the monthly financial review, this year from April to August, Indian Railways faced a shortfall in earnings, while its expenditure rose. The shortfall in earnings from passengers against the budgeted target is around Rs 11,852 crore. While the state-run transporter factored in growth in passenger traffic of around 1.8%, there was an overall drop of 1.3%.

As opposed to the target of Rs 23,584.88 crore earnings in the passenger segment, the earnings were only Rs 22,384.97 crore leaving a shortfall of Rs 1,199.91 crore at the end of August. In the goods sector too, the railways could earn only Rs 46,433.37 crore as against the budget projection of Rs 55,034.13 crore leaving a gap of Rs 8,600.76 crore. While the ordinary working expenses rose from the budgeted Rs 66,952.35 crore to Rs 68,779.06 crore, the operating ratio is well above the 100% mark, an indication of deteriorating financial health.

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The fall in freight earning is a cause of worry as it is considered to be the bread and butter of railways, said a senior official involved in loadings. However, the official said, "The coal loading was badly affected due to the flooding of coal mines. The slowdown has also affected the steel and cement sector.”

With the earnings not picking up pace, the railways recently waived its “busy season” surcharge, which is levied on freight customers from October to June, hoping to wean away traffic from the road sector.

As far as passenger booking is concerned there is a decline as compared to the last year for the corresponding period. There were total 3,948.88 million passengers booked tickets during April 1-September 20, 2019, as against 3,999.76 million passenger booking for the same period last year, showing 1.27% decline.

According to the data, less number of suburban commuters availed the local train service in this period as compared to the last year. While 2,240.19 million commuters used the suburban service during April 1 and September 2018, the number fell to 2,214.83 million for the same period this year, which is a negative growth of 1.13%.

In order to prevent a further slide, the railways has proposed to undertake certain measures including cleaning of trains and stations done through sponsorship and Corporate Social Responsibility; review trains with less than 50% occupancy and decrease their frequency or merge them; get repair of staff quarters done by monetising Railways’ land; retire diesel engines which are over 30 years old to save fuel; save fuel cost by implementing better practices; optimise maintenance practices and rework operations for better earnings.

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Meanwhile, Reserve Bank of India (RBI) has scaled down the growth forecast for the current fiscal to 6.1% from 6.9%. GST collection in September has also declined to Rs 91,916 crore from Rs 98,202 crore in August, according to the government data.