Indian Railways' operational efficiency may be at its worst since 1951

Fiscal 2017-18 could be the worst year in terms of performance for the Indian Railways since 1951. Railways posted the worst-ever operating ratio of 98.4% during the fiscal. An operating ratio of 98.4% means the Railways spent 98.4 paise to earn Re 1 in the last financial year, implying a tiny surplus. Operating ratio is used to measure the operational efficiency of any organisation. Higher the operating ratio, lower the financial resources available for expansion and growth.

During the early years of 1950-1970, Indian Railways had maintained a healthy operating ratio. In the year 1950-51, the operating ratio was at a level of 81%, which improved to 78.75% till 1960-61. Ten years later in 1970-71, the operating ratio worsened to 84.13% meaning a surplus of over 16 paise on every rupee spent. But, these were good times for Indian Railways before the operating ratio started significantly declining.

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During the years between 1980 and 2000, the operating ratio of Indian railways worsened to 96.07% in FY81 and moderated a bit to 91.97% in FY91. In FY96 and FY97, the Railways started to show better results and improved its operating ratio to 82.45% and 86.25%, respectively. The following years of FY98 to FY01 showed a period of declining performance as the operating ratio worsened to 90.9%, 93.3%, 93.3%,98.3%, respectively.

From FY02 to FY08, the Railways recorded six years of continuous improvement. It saw operating ratio of 96.6% (FY02), 92.34% (FY03), 92.3% (FY04), 90.98% (FY05), 83.7% (FY06), 78.68% (FY07) and 75.94% (FY08). In FY09 the ratio again worsened to 90.46%.

From FY10 onwards to the present date, the best operating ratio was 90.2% in FY13. The year-wise operating ratio during the said period was 95.3%(FY10), 94.6% (FY11), 94.9% (FY12), 90.02% (FY13), 93.6 (FY14), 91.25% (FY15), 90.48% (FY16). The last two years have been particularly bad for the Indian Railways as the operating ratio has reached a level of 96.5% (FY17) and 98.4% (FY18).

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Union minister Piyush Goyal, in his interim Budget speech, was hopeful and said that operating ratio of the Railways was set to improve from 98.4% in 2017-18 to 96.2% in 2018-19 and to 95% in 2019-20.

On the contrary, the figures have turned out worse. Railways' expenditure on salaries has been gradually increasing with a significant jump every few years due to Pay Commission revisions. The pension bill is also expected to increase further in the coming years as about 40% of the Railways staff was above the age of 50 years in 2016-17.

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