Indian Railways passenger revenue falls; whopping 78% rise in cancellations

The number of passengers taking a train to their destination, instead of a bus or a flight, continued to decline this fiscal on the back of increased cases of train cancellations by Indian Railways. To put this in perspective, there has been an almost 78% rise in the number of train trips cancelled during April-June this year compared to the same period in 2017. Besides, there have been significant train delays too, as the aggressive maintenance schedule undertaken by the Indian Railways (IR) necessarily shut down train movement for long periods of time. 

The increased rate of cancellations and delays have put off passengers and their numbers as well, as earnings from this segment declined in the June quarter. However, government officials say the situation is likely to improve now, as the IR has decided to award mega maintenance blocks on Sundays and publicise train re-scheduling due to these blocks. They say the overall punctuality of trains has improved significantly in June over May and should improve further - which could well mean disappointed passengers would return to take trains instead of using other means of transport. 

Remember, fares have not been increased in years and the flexi-fare scheme (where fares rise as every 10% seat get filled) has also been tweaked to reduce fares on certain premium train journeys.

“We experienced a temporary blip in passenger earnings in June quarter. The situation is bound to improve as mega blocks (the time when no train movement is allowed on the tracks due to maintenance work) have been shifted to Sundays and are being done with coordination among various Railway zones. Train punctuality has already begun to improve. Going forward, the number of passengers as well as earnings from the passenger business will increase,” a senior government official said, requesting anonymity.

This official also pointed out that the FY19 passenger earnings target of IR at Rs 52,000 crore will likely be met and it was quite early to despair over the “slight” decline in passenger numbers. An overwhelming 93% of the country’s train passengers travel unreserved. The remaining about 7% account for almost two-thirds of the IR’s total passenger earnings.

As per data from the railways, gross earnings from passengers declined by 1.37% to Rs 1,221.31 crore in Q1 from Rs 1,238.28 crore in the same period of the previous year. This works out to a decline of close to Rs 19 lakh on an average every single day of the quarter. The number of passengers booked on an originating basis too declined but by a lower margin of 0.07% from 2087.1 million to 2088.54 million. In other words, IR saw almost a 16,000 daily decline in passengers on board its nationwide network of trains in the April-June period.

But record freight haulage has ensured that the overall earnings of the country’s biggest transporter showed growth during the first quarter. Remember, freight earnings account for almost 65 paise of every rupee earned by the IR and are used to subsidise passenger earnings. So in effect, improved freight earnings are a life saver for the railways, which is expected to report a historical worst operating ratio of close to 98% this fiscal. 

Operating ratio is a metric which explains what the IR has to spend to earn each rupee; it has to spend 98 paise to earn that rupee. Huge pension and pay commission payments besides lacklustre earnings from passengers are the two main reasons for the worsening operating ratio of the railways.

For the June quarter, the IR transported 299.4 million tonne (MT) of freight against 281.17 MT in the corresponding period last fiscal, an increase of over 18 million tonne. Earnings from freight grew to Rs 30,139.96 crore (Rs 27657.66 crore), an increase of Rs 2,482.3 crore. In other words, the incremental year-on-year earnings from freight during Q1 were over Rs 27 crore each day on an average. Quite clearly, the good show on freight has spared IR the blushes in the first three months of this fiscal.

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Railways finances need a boost even after the good show on the freight front and expectations that passenger earnings will improve in the coming quarters. The total earnings’ target for 2018-19 is Rs 2 lakh crore, up from about Rs 1.78 lakh crore registered in 2017-18. This means railways will have to generate an additional revenue of Rs 22,000 crore this fiscal. It is eyeing about Rs 10,000 crore additional earnings from freight, and another Rs 1,000 crore from the flexi fare scheme. But this still leaves a gap of Rs 10,000 crore shortfall in the earnings’ target.

Source: DNA Money