The Indian Railways (IR) has been going through a rough financial patch for the last few years. But this year, it has reached an unprecedented low. The operating ratio (OR) is one of the most popular measures used to show the strength of railway finance. It has come down to 98.44% in FY 2018-19. The OR simply refers to how much is to be spent to earn ₹100. So when the OR is 98.44%, it means that IR has to spend ₹ 98.44 to earn ₹100.
Railway development includes gauge conversion, electrification and spending more on railway safety areas among other things. A report on IR finance submitted in parliament has revealed a precarious financial condition for the organisation. In reporting the OR, the IR has used a trick in 2017-18. The OR was actually much worse than what was reported. There have been some advance payments from two PSUs. These advance payments were actually counted in the IR’s financial reporting. The IR would show a negative balance of ₹5,676.29 crore instead of a surplus of ₹1,665.61, had these advance payments from NTPC and IRCON been absent. Without these advance payments, the OR would have been 102.66%.
Some important facts
This story is from the January 16-31, 2020 edition of BUSINESS ECONOMICS.
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