Indian Railways on track to financial sustainability

Naresh Salecha Posted on: 2021-02-12 11:37:00 Viewer: 476 Comments: 0 Country: India City: New Delhi

Indian Railways on track to financial sustainability

Humanity faced one of its biggest challenges last year in over a century. The Indian Railways, which was under stress due to subdued revenues because of capacity constraints, was adversely impacted by the lockdown. The challenges before the Railways got accentuated with a drastic fall in passenger revenues even while it had to keep up salary and pension payments.

But the Railways turned this adversity into an opportunity. As a result, it is on the road to transformation. The Railways, with its redefined objectives, mission-mode approach — inducting technologies, management mantras, and spree of innovations to cater to a new aspirational India — and zeal to make it the most favoured mode of transport for both business and passengers is proving doomsayers wrong. It’s no longer business as usual for the Railways.

Unprecedented challenges are thrown up by Covid-19 only reinforced the resolve of the Railways to ensure outstanding all-round performance. The freight business has been breaking records and business development is taking new dimensions. Due to the pandemic and consequential lockdown, freight loading was severely impacted in the initial part of the current fiscal.

Loading gradually picked up due to the effort of the managers and timely policy interventions. The formation of Business Development Units (BDUs) at the division, zone and board levels, doubling of the speed of freight trains from 23 kmph to 46 kmph, the introduction of time-tabled parcel trains and the ongoing freight rationalisations, including concessions, had a positive impact on the loading trends.

The impact of all these initiatives can be gauged from the fact that loading, which had declined by 35.3 percent in April 2020 vis-a-vis the corresponding period of the previous year, is almost back to the previous year’s level. It is expected to improve further in the rest of the current year and the efforts are on to exceed the 2020-21 RE loading target of 1,210 million tonnes.

This paradigm shift in the business approach of ‘Customer first’ is paying off. Passenger reservations are moving towards last year’s level in spite of the fewer number of trains running due to Covid.

Expenditure optimisation is leading to savings on hitherto unforeseen fronts. Timely policy interventions by the government was well-aided by electrification of routes, leading to substantial savings in operational costs. The Railway’s finances are also positive.

The operating ratio, at times, is used as a sole yardstick to gauge sustainability. The Railways is perhaps the only organisation of its scale which keeps pension and salaries as part of its working expenses. When a change in fortunes was round the corner, Covid happened. The Railways decided to absorb the shock and loss in revenues without burdening the exchequer.

The growth of revenues in the coming years will ensure that all such ODs or financing will be wiped out earlier than expected. Next year, the Railways is targeting double-digit CAGR in revenue vis-a-vis 2019-20. While passenger revenues at ₹61,000 crore and freight at ₹1.38-lakh crore will be the mainstay, non-fare revenue is getting focus and the target is set at ₹12,000 crore, which includes asset monetisation. Higher revenues with judicious expenditure will enable the Railways ensure payments of support received.

Budget 2021-22 has been historic for the Railways. With its focus on infrastructure projects, the Budget has allocated the highest capex for the Railways. This year, the Railways got a record budgetary allocation of ₹1.10-lakh crore, and a total capital expenditure outlay of ₹2.15-lakh crore for the coming financial year.

The capex plan will not only enable the Railways fund projects under the National Investment Pipeline, but will also cater to priority projects under Vision 2024. Extra-budgetary resources are being raised at extremely competitive rates to fund remunerative projects with adequate moratorium, which will enable these projects to be self-sustaining. The pace of project execution has increased with regular monitoring and resolution of inter-ministerial issues expeditiously.

The Railways has prepared a National Rail Plan 2030. The creation of a future-ready railway system will lead to increased transportation capacity, faster transit and lower logistics cost for industry, which is at the core of the strategy to enable Make in India. The Railways is marching ahead on its bigger plans like achieving 100 percent electrification by 2023, a net-zero carbon emission network by 2030, modernisation, ease of ticket booking, and online freight services.

A higher capital budget for expanding the rail network will help complete priority national projects in Jammu & Kashmir, Uttarakhand and the North-East, dedicated freight corridors (DFCs) and other important throughput enhancement projects. These, along with speeding up of the Bullet Train project, will give a boost to the construction industry as well as employment generation.

Despite the loss of revenues due to the pandemic, the Railways has ensured that capital expenditure remains on track. The Railways has once again proved to be the engine of growth for the Indian economy even in these challenging times.

(via The Hindu Businessline)





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