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Saddled with pension costs, Railways operating ratio works out to 114% FY20 and 131% in FY21

Mamuni Das New Delhi | Updated on February 05, 2021

Covid-related resource gap adds to revenue pressure

The Railways’ operating ratio has crossed 100 in fiscal 2020 and fiscal 2021 on the back of revenue pressure in Covid-times and the public transporter having to bear not just staff pay but pension expenses as well.

Operating ratio, simply put, is amount of money the Railways has to spend to earn ₹100. Lower operating ratio implies better financial health.

If the Railways was to set aside funds for its pension fund from its own revenues in 2019-20 and 2020-21, then the operating ratio will worsen to 114.19 per cent and 131.49 per cent respectively, according to official documents.

Indian Railways, which has about 12 lakh government employees and around equally high number of pensioners, continues to meet its pension cost though its budget was merged with Union Budget, making it the only such government body to do so.

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The required appropriation to pension fund in 2019-20 is ₹48,350 crore at Revised Estimates and in 2020-21 is ₹51,000 crore per estimated pension expenditure in revised estimates, the Railways said in its budget documents.

“Due to Covid related resource gap, the Railways appropriated or estimated to appropriate less than required amount to pension fund in 2019-20 and RE 2020-21. With required level of appropriation to pension fund from Railway revenues in Actual 2019-20 and in RE 2020-21, the operating ratio would be 114.19 per cent and 131.49 per cent respectively,” the Railways said.

Supported by a Covid-19 loan of ₹79,398 crore from the Finance Ministry, the Railways has estimated an operating ratio of 96.96 for the ongoing fiscal (which saw Covid-19 impact play out). The Budgetary support for the Railways in the current fiscal is at ₹1.08 lakh crore, which includes the special loan for Covid-19related resource gap’.

The operating ratio in the ongoing fiscal is better than the operating ratio of 98.36 in fiscal 2019-20, a year when facing a drop in demand, the Railways had to slash its freight rates mid-year to bring more goods into its fold.

Published on February 05, 2021

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