After the liberalization of air services in India air prices became competitive and cheaper. The airlines, as a result, could bring more passengers. The main shift was from the upper class train passengers. This was because the gap between upper class train fares and air fares narrowed. So the ailing Indian Railways (IR) could not increase its fare structure as this would result in greater outflow of higher class passengers. But the situation is reported to have been changing recently. A section of higher class train passengers who shifted to air trips are now availing train services. A few weeks ago Ghanshyam Singh when he was General Manager, Eastern Railways, told BE that the situation is changing for higher class railway passengers. A section of passengers are coming back from air lines to Railways. This was a good sign for IR, Singh commented. Singh, who is now a Member (Traction) Railway Board, could not, however give any estimate of passenger shifting. He mentioned only the trend. If this happens to be a long term phenomenon railways has to be more efficient in its services. The present government is showing interest in developing railways.
IR is concentrating on enhancing infrastructure and capacity in a big way
Indian Railways (IR) has reported that its infrastructure development has been going on in a big way. In some cases it has performed at record levels. There has been improvement of passenger and freight traffic. Suresh Prabhu, Minister of Railways has recently been reported to have said at a CII programme in New Delhi that both rail passengers and freight traffic have increased substantially over the years but railway infrastructure has not. It is for this reason that the Railways are trying to expand its network significantly. But without enhancement of capacity the desired result cannot be expected. That is why Prabhu mentioned that the Dedicated Freight Corridor that was coming up between Delhi and Mumbai would help bifurcate passenger and freight traffic in this segment. In addition to this, Prabhu highlighted the High Speed corridors that were being set up between Delhi and Mumbai and Delhi and Kolkata as well as the Mumbai – Ahmedabad High Speed Railway. These projects, he added would help increase the capacity of the railways.
On the same occasion, Ravindra Gupta, Member, Railway Board, stated that over the last three years, the Railways has introduced a slew of reforms. These include doubling the pace of infrastructure creation with a special focus on safety related infrastructure, improving connectivity to the Northeast, and improving the average speed of the existing network among others. He stated that 2 more locomotive factories have been set up and work has begun on modernizing stations.
Weak financial front
One of the simplest measures for understanding the financial position of IR is operating ratio (OR). The OR represents the amount of money needed to be spent to earn Rs. 100. The operation ratio (OR) for 2016-17 is 97. This means IR has to spend Rs. 97 to earn Rs. 100 as revenue. The higher the OR, the lower the surplus money to spend on modernization and other development expenditure in IR. The present OR is the lowest in 16 years. That means the IR is in very bad shape financially. In spite of that IR claims that it has been showing a commendable performance in development of IR, particularly, in areas like passengers’ safety. How has this been possible for IR while IR has been under financial pressure? S N Agarwal, GM South Eastern Railway (SER) said, “The IR has got loans from some sectors like LIC. This is why it has been possible”.
If one goes into details, one can see that only 10 rail zones out of 17 make a profit. The main profitable zones are East Coast, South-East Central, North Central, West Central, and South Eastern. On the other hand Northeastern Railway is the most loss making zone of IR. Its OR is 196.52. Then come Northeast Frontier and Northern with OR 185.71 and 185.56 respectively. The highest OR, that is 237.80, goes to Metro Railways, Kolkata.
But one cannot correlate OR and inefficiency. In IR the passenger segment is highly subsidized. That is why
the loss making zones are mainly passenger centric. Dense passenger traffic requires a large number
of staff to continue the operation of railways. This increases the staff cost and it is reported to be the main reason for higher OR. But one should not forget that excluding a few countries like Japan, France and Germany the passenger segment is subsidized throughout the world.
On the financial front, the Prabhu stated that the railways were trying to diversify its freight basket from the current level of 10 major commodities to around 40. He also stated that the railways were trying to increase non-fare revenue and reduce expenditure through measures such as introducing a digital supply chain and by adopting solar energy to reduce energy costs.
Gupta observed that freight performance has increased marginally despite the slump in the global commodity markets. Customer experience is being improved by adopting digital technologies. In the medium-term, Gupta stated the railways would focus on expansion and decongestion of the existing railway network.
SER overall performance helped it to bag Govind Vallabh Pant shield in 2017
IR has been performing better and has shown a bright example with positive result in a zone which has won the highest award. In 2016-17, SER has carried 259.06 million as originating passengers against 256.88 million passengers carried in 2015-16 registering an increase of 0.85%. Out of a total 259.06 million passengers, 137.10 million were suburban passengers and 121.96 million were non-suburban passengers. SER’s earnings from passenger traffic have increased by 4.67% compared to Rs.1924.75 crore in 2015-16.
This remarkable performance in the passenger sector has been possible due to the running of 580 special trains in 2016-17 towards different directions during festive seasons and summer and winter holidays. This apart, augmentation of existing mail/express trains during the rush period also contributed to the growth in passenger traffic. The passenger traffic has also increased with enhancement of different passenger facilities in trains and replacement of existing rakes with LHB rakes.
The goods earnings in 2016-17 have increased by 6.81% to Rs.11555.75 compared to that in 2015-16. SER has reported that it outperformed in 2016-17 as it crossed its targeted goods transports.
IR is the main artery of the country’s transportation. But it needs more investible financial resources to make it a world class system. In a developing country a proper fare structure is needed. Presently passenger fare is one of the least for IR. But experience shows that a large enhancement of the fare structure results in decrease in passenger earnings which also affects economic growth. Central government has to take responsibility to make the IR a vibrant sector of the economy. Government has been keen to set up a Rail Development Authority (RDA) as an independent regulatory body in New Delhi through an Executive Order of the Central Government. Cabinet has approved the proposal of the Ministry of Railways. RDA will help Government to take appropriate decisions
on pricing of services commensurate with costs, suggest measures for enhancement of non-fare revenue, protection of consumer interests, promote competition, encourage market development, create positive environment for investment, promote efficient resource allocation, bench- marking of service standards, suggest measures for absorption of new technologies and human resource development and provide framework for non-discriminatory open access to the Dedicated Freight Corridor infrastructure. But only time will tell what be the future of the IR will be.