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The Indian Railways’ revenue problem

  • Published
    30th Oct, 2023

Context:

This is the first of a three-part series of articles on the Indian railways, its capital expenditure and freight business.

Rising Expenditure

  • Present scenario: Indian Railways intensifies capital expenditure post-budget merger.
  • Hurdles in generating capital: Operating ratio stagnates, hindering profitability and capital surplus.
  • Over-reliance on Gross Budgetary Support (GBS) and Extra Budgetary Resources (EBS) leads to growing debt.

Concerns

  • Sources of Loss: Passenger services incur significant losses, necessitating cross-subsidization from profitable freight segment.
  • Report by CAG: Comptroller and Auditor General highlight Rs. 68,269 crore passenger service losses in 2021-22.
  • Increasing Freight Volume: Emphasis on boosting freight volumes to improve revenue, but current growth lags behind national economic growth.

Suggestive Measures

  • Optimizing Freight Business: Artificial division of cargo into goods and parcels hampers efficient handling and transportation.
  • Bifurcation of cargo: Proposal to categorize cargo based on characteristics, bulk and non-bulk.
  • Need for reforms: Declining rail share in crucial commodities like coal, iron ore, and cement underscores need for strategic reforms.
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