Railways’ 98% operating ratio not a reflection of its true financial performance: CAG

What is the news?

The Comptroller and Auditor General of India has tabled the Railways Finances Report in Parliament.

What are the key findings of the report?

Operating Ratio(OR): It has deteriorated from 97.299% in 2018-19 to 98.36% in 2019-20 (This is the worst operating ratio in the past 10 years). Moreover, if the actual expenditure on pension payments is taken into account, the ratio will be 114.35 %.

Note: OR is the ratio of the working expenditure (expenses arising from day-to-day operation of Railways) to the revenue earned from traffic. A higher ratio indicates a poorer ability to generate surplus that can be used for capital investments such as laying new lines, or deploying more coaches.

Total Receipts: The total Receipts has decreased by 8.30% in 2019-20 as compared to 6.479% increase in 2018-19.

Cross-Subsidization: Profits from freight traffic were utilised to compensate for the loss on operation of passenger and other coaching services.

What are the recommendations given by the CAG Report?

Firstly, Diversify freight basket to enhance earnings and also exploit idle assets to increase other earnings.

Secondly, take steps to augment internal revenues, so that dependence on Gross Budgetary Support (GBS) and Extra Budgetary Resources (EBR) is contained.

Thirdly, Review the working of loss making PSUs and fast track the winding-up process of non-working Railway PSUs

Fourthly, revisit the passenger and other coaching tariffs so as to recover the cost of operations in a phased manner and reduce its losses in its core activities.

Source:This post is based on the articleRailways’ 98% operating ratio not a reflection of its true financial performance: CAG published in Indian Express on 23rd Dec 2021.

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