Railway's operating ratio pegged at 96.98% in 2022-23 on capex push

With the government giving an extra thrust on the Gati Shakti Plan, the Indian railways is all set to see its highest ever capital expenditure of Rs 2.45 trillion for 2022-23, up 14 per cent from the revised estimate of Rs 2.15 trillion for the current financial year in the Union Budget for 2022 presented by finance minister Nirmala Sitharaman on Tuesday.

This will result in the operating ratio, a key metric to assess the Indian Railway’s financial health, being under pressure due to heavier capital expenditure.

“We are targeting 96.98 per cent operating ratio (OR) in the coming year. We believe we will improve this. We are today already achieving over 4 million tonnes of loading every day. We are now targeting a consistent 4.5 million tonnes per day and then 5 million tonnes per day,” Railway Minister Ashwini Vaishnaw told Business Standard.

Roughly put this means the railways aims to spend Rs 96.98 for every Rs 100 it earns in 2022-23.

“Even though we have targeted it, we should be able to achieve better than that,” he added.

The OR of the Indian Railways has worsened to 98.93 per cent in the revised estimates for financial year 2021-22. This is lower than the 96.15 per cent OR it had budgeted in the year. Net Revenue of the national transporter crashed to Rs 875 crores in the revised estimates of 2021-22, down from the Rs 6561 crores that was budgeted for the year.

For the coming financial year 2022-23, the Railways has budgeted a net revenue of Rs 5360 crores.

“We generally achieve (freight) loading of around 1200 million tonnes in a year. This year we are reaching close to 1400 million tonnes loading, this is a record. Since the physical performance has improved, there is no need to reimburse due to COVID-19 or because of any other reasons,” Vaishnaw said.

The capex for 2022-23 includes Rs 1.37 trillion from general revenues, Rs 1.08 trillion from Internal and Extra Budgetary Resources (IEBR) and Rs 200 crore from the Nirbhaya fund. The capex as part of the budget estimate in 2021-22 was also Rs 2.15 trillion. Announcing the budget, Sitharaman said that the national transporter will move towards integration with other departments like roads, agricultural and postal services, while focussing on further safety.

Total receipt of railways comprising revenues from passenger, goods, other coaching, sundry and other heads were kept at Rs 2.4 trillion in the budget estimate for 2022-23 as against a revised estimate of Rs 2.02 trillion for the current financial year.

“Railways will develop new products and efficient logistics services for small farmers and small and Medium Enterprises, besides taking the lead in integration of Postal and Railways networks to provide seamless solutions for movement of parcels,” Sitharaman had said in her speech. The government will focus on ‘One Station-One Product’ concept to give thrust to local businesses and supply chains.

As a part of Atmanirbhar Bharat, around 2,000 kilo meter of rail network will be brought under Kavach, the indigenous world-class technology for safety and capacity augmentation in 2022-23. In addition to this, the government is also set to come up with 400 new Vande Bharat Trains with better energy efficiency and passenger riding experience in the next three years.

As part of the expansion in cargo traffic, around 100 PM GatiShakti Cargo Terminals for multimodal logistics facilities will also come up in the next three years. "Innovative ways of financing and faster implementation will be encouraged for building metro systems of appropriate type at scale. Multimodal connectivity between mass urban transport and railway stations will be facilitated on priority," she added.