The Railways has asked its premium freight customers, those whose business with the national transporter in a fiscal exceeds Rs 500 crore, to make advance payments for their 2020-2021 operations, officials said on Tuesday, in a bid to ensure that the beleaguered carrier ends the current financial year with a healthy balance sheet.
Last year, this financial engineering had brought in additional revenue of Rs 18,000 crore for the railways under the Freight Advance Scheme, which offers its premium freight customers tariff certainty for the entire fiscal and priority in rake allocation.
The advance payment has to be made by March 31, 2020, to avail benefits for 2020-2021 fiscal, a policy document on the matter said.
"This is not just about earning additional revenue, but also building a relationship and ensuring continued business from our major customers. This also ensures that we don't lose them, to say, the roadways.
"We are giving our major customers benefits under this scheme which they will otherwise not get. It's just a business. Zonal railways have sent out letters encouraging them to avail the scheme," a senior railway official said.
In 2019, the NTPC, which has a business of Rs 8,557 crore with the railways, made an advance payment of Rs 15,000 crore, while the Container Corporation of India (CONCOR) made an advance payment of Rs 3,000 crore (it's business with the railways is Rs 3,729 crore).
Sources say that two private entities have shown interest in the scheme for 2020-21 fiscal and will sign the dotted lines soon.
Around 50 freight customers had a business of Rs 500 crore or above with the railways in the previous calendar year, and hence, they are eligible for the scheme.
Central and state government organisations generate the most revenue for railways through freight loading.
Private entities like Ultratech Cement (Rs 2,773 crore), Jindal Steel and Power Limited (Rs 1,527 crore), Bhushan Steel (Rs 1,492 crore), Vedanta Limited (Rs 1,104 crore), Adani Power Maharashtra Ltd (Rs 798 crore) and Ambuja Cement (Rs 614 crore) are also among the railways' Rs 500-crore plus premium customers' list.
In one of the letters sent to Adani Power Limited, the South East Central Railway has encouraged it to avail the scheme.
"As your power house requires regular supply of coal through rail movement, it is once again reiterated to consider payment of suitable sums as advance freight to avail benefits as applicable.
"Monday and Friday will be the nominated two days for according higher priority within the same class to traffic under the Freight Advance Scheme," the letter stated.
"In case, you are not able to pay a minimum Rs 500 crore and you wish to apply for lesser amount please feel free to apply so that the same may be considered," it added.
Such letters, officials said, are being sent to all premium freight customers.
Through the scheme, the Railways, officials said, have set a target to at least cross the Rs 18,000-crore mark achieved for the current fiscal.
This additional revenue generated through advance freight payments will ensure that the railways end the year with a much improved operating ratio -- the amount the railways spends to earn Rs 100.
The Railways ended 2018-19 with an operating ratio of 96.2, just a tad better than the 10-year low of 98.4 in 2017-18. The operating ratio target in the Budget Estimates for the year 2019-2020 was 95 per cent.