Indian Railways gets massive earnings boost as demand booms

A record coal haulage continues to bring cheer to Indian Railways (IR) since the last fiscal. The good news on coal carriage continues in the first two months of the current fiscal too. With the economy back on the growth path, there has been a huge upsurge in demand for coal from power plants across the country and this has boosted the earnings of IR significantly, with coal accounting for nearly half of the railway’s total freight basket.

The IR’s record total freight haulage in 2017-18 stood at 1,162 million tonne (MT), which was 53 MT more than the previous fiscal (1,109 MT). Buoyed by this success, the IR is now eyeing 2,000 MT of freight loading by 2022-23, an increase of over 72% in five years. Of course, the success of this ambitious target hinges primarily on a huge increase in coal haulage. As of now, annual coal loading is around 555 MT but the projection for 2022-23 is almost three times at 1,500 MT.

According to a data from IR, total goods carriage saw a year-on-year increase of a whopping 13.45 MT between April and May this year at 199.87 MT (186.42 MT). Total earnings from freight jumped by more than 10% to Rs 20,124.28 crore (Rs 18,232.37 crore), or almost by Rs 1,900 crore during these two months. That works out to incremental earnings of over Rs 30 crore per day, on an average.

Coal has been the harbinger of good news for IR since last fiscal. And this commodity has seen the maximum increase at 10.19 MT over and above the target for haulage in the first two months of this fiscal at 101.91 MT (91.72MT). Earnings from coal are up by Rs 2,220 crore in the first two months of 2018-19 at Rs 9951.43 crore (Rs 7730.62 crore). Remember, the IR’s freight basket comprises cement, steel, iron ore, foodgrains and fertilizers too but none of these other commodities has given a boost to the railway’s earnings anywhere near coal. So for example, while cement haulage has gone up by 1.16 MT over the target at 20.32 MT (19.16 MT) but the earnings have actually declined by almost Rs 34 crore over the April-May period.

Improved freight earnings are critical for railways since freight accounts for almost 65 paise of every rupee earned or two-thirds of total earnings. Then, freight earnings are used to subsidise passenger earnings, where the cost of transporting each passenger is almost double the earnings from each. So in effect, improved freight earnings are a life saver for the railways, which is expected to report a historical worst operating ratio of close to 98% this fiscal. Operating ratio is a metric which explains what the railways have to spend to earn each rupee's 98% means it has to spend 98 paise to earn that rupee.

Huge pension and pay commission payments besides lacklustre earnings from passengers are the two main reasons for worsening operating ratio of the railways.

Meanwhile, a senior railway official said that the welcome rise in freight earnings has come after months of efforts to correct past mistakes and several policy initiatives. In the past, a skewed tariff policy and some other issues pushed freight away from the railways to other modes of transport, primarily the roadways.

So the railways took several measures: It offered 30-40% discounts in the empty flow direction (where the cargo has been offloaded and the wagon has to return empty). This meant traffic in empty flow direction grew 208% in loading and 212% in earnings year on year last fiscal. A 20-30% discount was offered to a host of commodities for certain kinds of wagons; a long-term tariff contract was signed with 24 key customers last fiscal which enabled more freight loading as customers were assured of a stable tariff rate through the year and the railways were assured of an increased tariff after some time. Some other discounts were also offered on specific commodities.

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Total earnings’ target for 2018-19 is Rs 2 lakh crore, up from about Rs 1.78 lakh crore achieved in 2017-18.
This means the railways will have to generate an additional revenue of Rs 22,000 crore this fiscal. It is eyeing about Rs 10,000 crore additional earnings from freight, and in case the flexi fare scheme (applicable in select premium passenger trains) continues, incremental Rs 1,000 crore could be earned from this. But this still leaves a gap of Rs 10,000 crore shortfall in earnings’ target.

By Sindhu Bhattacharya: DNA