No official Railway Board PDF has been traced for this entry yet. The text below was read from the document held in the library.
| Type | Commercial Circular |
|---|---|
| Topic | freight |
| Currency | Currency not verified |
optimal decision making. The major reason for departmentalization is the multiplicity of different channels through which people are hired into the railway services and the resulting isolated structure of the various services Indian Railways is financed through: (i) its own internal resources (freight and passenger revenue, and
1 STATE OF INDIAN RAILWAYS Prachee Mishra September 2018 Business as usual may be an unsustainable prospect for Railways Railways finances and infrastructure investment are stuck in a vicious cycle In addition, the organisational structure of Railways needs an overhaul 1 INSIGHTS Business as usual may be an unsustainable prospect for Railways Railways’ operating ratio has consistently been higher than 90% in the past several years, which indicates that its capability to generate operational surplus is low. Further, its expenditure on staff and pension has been increasing. Consequently, capacity growth is increasingly being funded through borrowings. However, an increased reliance on borrowings may further worsen the financial situation of Railways. Improving operational surplus through fare hikes will be difficult for Railways because: (i) Railways’ freight rates are already higher than other modes of transport for several commodities. Consequently, it has been losing out on the FMCG and automobile markets (which are preferring roads). The share of Railways in total freight traffic has declined from 89% in 1950-51 to 30% in 2011-12. Further, the freight basket is limited to certain bulk commodities, and heavy dependence on coal transport poses a risk to the business. (ii) Upper class fares face competition from low cost airlines and AC bus fares. Any further increase in upper class fares means Railways will lose traffic to other modes of travel, which are either faster or provide better last mile connectivity. (iii) Second class passenger traffic which contributes to 67% of the total passenger revenue, continues to be cheaper than both road and air travel. However, it may be difficult to increase fares as these services are used by the relatively poorer section of society. The passenger business made losses of about Rs 33,000 crore in 2014-15, which are classified as social service obligations. The question is who should bear this subsidy – Railways, or the central government; or in case of suburban rail - the state or the local government. Potential ways out from the current scenario could be to invest in: (i) Dedicated Freight Corridors that could bring back freight traffic, and (ii) high speed trains which could help improve passenger revenue. These services could be priced higher side than other modes of travel, but they would provide superior services. The challenge would be to make these services cost effective for the users. Railways finances and infrastructure investment are stuck in a vicious cycle Poor finances of Railways had led to low investment in infrastructure. Low investment means Railways’ infrastructure and services take a hit (resulting in low speed, delays, and safety issues). Poor infrastructure and services result in loss of remunerative business for Railways which leads to further deterioration of finances. This has become a vicious cycle for Railways. The rail network currently faces huge capacity constraints, and the high density network (network that connects metros) has already reached saturation. With high levels of capacity utilisation, and the introduction of new trains, trains tend to slow down, and affect the quality of services. In addition, the organisational structure of Railways needs an overhaul The organisational structure of Railways needs an overhaul to create a structure that is more conducive for nimble decision making, and is more accountable. Currently, decision making in Railways is centralised. The Railway Board has the powers of policy making, operations, and regulation. Railway zones have very limited powers with regard to raising their own revenue. Therefore, they are unable to contribute more effectively towards improving Railways’ revenue. Further, apart from its core function of running trains, Railways also engages in peripheral activities such as running
Extract shown above; the full text is available in the search app.
Open this circular in the search app · Search all 4,233 documents