Railways' FY26 operating ratio may be pegged at best in 5 yrs

The Union budget may peg Indian Railways' operating ratio at the best in five years in FY26 on higher freight revenue and increased central funds, two people aware of the matter said.

- Subhash Narayan

Operating ratio, a measure of operational efficiency, is the ratio of amount spent to earn every ₹100. A higher ratio signals weak ability to generate a surplus, while a lower operating ratio means the Railways can spend more on large capex projects.

In FY26, the operating ratio is expected to be below 98%, the first time since FY21, the people cited above said on the condition of anonymity.

After falling to 97.45% in 2020-21, the Railways' operating ratio in the next four years remained high at 107.39%, 98.14% and 98.65% (revised estimates), and 98.22% (budget estimate) in FY22, FY23, FY24 and FY25, respectively.

The finance ministry expects the national transporter to build on its success of increasing revenues over the past three years and strengthen its finances in FY26.

Operating ratio of the Railways, India's largest employer and transporter, has remained high due to its heavy pension liability. However, its post-pandemic rebound and the pick-up in freight and passenger revenues may give it enough room to improve internal revenue generation in FY26, driving down the operating ratio.