Financial challenges
Indian Railway(IR)augmenting the funds raised through Gross Budgetary Support (GBS) and Extra Budgetary Resources (EBS) to meets lack of surplus.
The merging of budgets helped this cause as GBS from the central government could be increased without much scrutiny.
With respect to EBS, there is a price to pay.
IR’s spending on repayment of principal and interest is pegged at ₹22,229 crore and ₹23,782 crore respectively.
Which together make it 17% of revenue receipts, a sharp rise from less than 10% till 2015-16.
Financial challenges
It appears that this debt liability was noticed as capex relied almost entirely on GBS in this year’s budget.
The unprecedented rise in capex appears to be predicated on the premise that the IR’s operating and financial performance should not be viewed in isolation.
Investment in railways boosts manufacturing and services, tax revenue for the government and allows for more job opportunities.
A key organisation like the IR cannot be allowed to go the Air India way — the investments made should be productive for IR’s revenues.
Operational discrepancies
The IR’s freight segment is profitable whereas the passenger segment makes huge losses.
The CAG report presented in Parliament on August 8, 2023 states that there was a loss of ₹68,269 crore in all classes of passenger services during 2021-22.
The profit from freight traffic nullified in cross subsidising passenger services.
Any significant increase in passenger fares is unlikely, the IR has no option but to boost its freight volumes and in turn its revenue.
Operational discrepancies
The annual growth in freight volume and revenue of the IR in the period April-July 2023 stand at 1% and 3% respectively.
The IR’s modal share in India’s freight business has steadily decreased to approx. 27% from upwards of 80% at the time of independence.
The movement of cargo by the IR is artificially divided into goods and parcels.
Shippers, are not interested in these differences as their concern is mainly about the safe movement of their cargo from point A to B at the least cost and as fast as possible.
Need for efficiency improvements in IR.
The 11 commodities in the IR’s transport basket account for 90% of tonnage and revenue.
Which coal is around 45% and iron ore and cement are around 10% each.
Although these three still account for two thirds of the IR’s total freight volume.
IR is the constantly fluctuating key index of Net Tonne Kilometres (NTKM), which fell for two successive years in 2015-16 and 2016-17 by 4% and 5% over the preceding years.
Demonetisation perhaps had some effect in fall as NTKM recovered in 2017-18 by 11% registering increase of 1.6% in 3 year period starting 2015-18.
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