Roadmap for Answer Writing

1. Introduction

• • Define the operating ratio and its significance as a measure of efficiency in the Indian Railways.
  • Briefly mention the increase in capital expenditure and the expectation of improved performance.

2. Key Factors Contributing to the Lack of Improvement

• • Identify and elaborate on the specific factors that have hindered improvement in the operating ratio:
    • Cross-Subsidization of Passenger Services: Explain how losses from passenger services negate profits from freight operations.
    • Rising Debt Levels: Discuss the reliance on GBS and EBS and the impact of debt servicing on revenue.
    • Declining Modal Share: Highlight the decrease in the railways’ share of freight transport and the competition from road transport.
    • Fluctuating Net Tonne Kilometres (NTKM): Describe how inconsistent growth in NTKM affects operational efficiency.
    • Decreasing Earnings: Mention the overall decline in net revenue due to various factors, including rising staff costs and the impact of the COVID-19 pandemic.

3. Conclusion

• • Summarize the key points and emphasize the need for strategic measures to address these challenges and improve the operating ratio.

Relevant Facts

• The operating ratio target for FY 2023-24 is set at 98.45%, which is higher than the previous year’s ratio of 98.22%, despite a capital expenditure allocation of ₹2.4 lakh crore, the highest ever for Indian Railways .
• A report by the Comptroller and Auditor General (CAG) indicated that losses from passenger services amounted to ₹68,269 crore in 2021-22, nullifying profits from freight traffic .
• Approximately 17% of Indian Railways’ revenue receipts are allocated to servicing debt, which has increased due to a lack of surplus funds .
• The modal share of Indian Railways in freight transport has decreased to about 27%, down from over 80% at independence, with significant competition from road transport.
• The Net Tonne Kilometres (NTKM) grew at an annual rate of only 3.5% over the seven years ending in 2021-22, which is much lower than the growth rate of road transport .
• In FY 2021-22, Indian Railways recorded a loss of around ₹15,000 crore, attributed to rising staff costs, the impact of the COVID-19 pandemic, and various social service obligations.