Why is Indian Railways running at a loss?

Siddharth Roy

(siddharth01.roy@gmail.com)

Indian Railways is one of the largest railway networks in the world. According to the latest data, India has 22,593 trains which connect 28 States and 8 Union Territories of India. Indian Railways also provide international services to Nepal, Pakistan and Bangladesh. It is also the second-largest employer in the world, providing jobs to millions of people in India. More than 24 million passengers travel daily by trains in India. However, even after so many passengers are using the railway services, it is still running at a loss. According to a report of the Comptroller and Auditor General of India (CAG), Indian Railways had incurred a loss of about Rs 26,388 crore in 2019-2020. The report also said that the operating ratio of Indian Railways for 2018-19 was 97.29%, which increased to 98.36% for 2019-20. Indian Railways earn their revenue from two sources. The first one is freight operation where trains transfer goods and the second one being the passenger trains. Indian Railways mostly earn its profit from freight operations, whereas the passenger trains are running at loss. We are all well aware that our first Prime Minister Pandit Jawaharlal Nehru was a staunch supporter of socialism. Although after independence, India adopted a mixed economy model, yet the Indian economy was more inclined towards socialism even after the liberalization. The aim of Indian Railways was to make travel affordable for people of every social strata and income group. Moreover, the Indian Railways is also a source of earning revenue for the Government. There are some social obligations of Indian Railways such as providing concessionary travel to the people of certain social sections, transportation of goods on concessionary fare to backward regions of India and Indian Railways charge less than its own running cost for its services. From the latest data, we know that Indian Railways charge less than half of its operating cost for carrying passengers. Indian Railways for every 10 km of travel spends 73 paisa per passenger but earns only 36 paisa for the same. From 20th March, 2020, except for the concessions given to the specially-abled, some patients and students by the Government, the concessions given to other categories of people in fares have been removed. Indian Railways started in the 19th century. Even after so many decades, India couldn't properly modernize the railway infrastructure. We are still dependent on the old colonial infrastructure set up decades ago.

According to some data, passenger trains between 2001-2002 and 2015-16 have increased by about 56% and freight trains have increased by 59%, although the track length has only increased by 12% in 15 years, hence leading to train traffic congestion. Every day trains have to wait for hours for clearance, the effect of which we get to see on their speed and efficiency. The lack of platforms and the outdated design of the trains are also responsible for the slow running speed of the trains. Open doors and windows, heavy rail coaches, old chain and buffer coupling system don't allow the trains to run at high speeds. Indian trains can travel at a maximum speed of 110-120 km/h whereas in Japan and China the trains run at a speed of more than 300 km/h. Moreover old tracks and trains lead to many train accidents in India every year. According to the review conducted by the Comptroller and Auditor General of India on bridge management, 339 important bridges, 4210 major bridges and 51,629 bridges were made before 1920, i.e. most of our railway infrastructure is very old. According to the Report of the Khanna Committee, in India 76% of rail accidents are caused due to derailment, 7% of the rail accidents are caused due to collision, 16% of rail accidents are caused due to level crossings and 1% of rail accidents are caused due to fire, for which the Indian Railways have to incur huge losses and loss of lives. Compensation for life loss and injury adds to the already high expenditure of the Indian Railways. Indian Railways is the sector with the maximum delayed projects after the surface transport and highway sector. Presently, more than 100 railway projects are pending across India which have been delayed by 5 to 15 years from the original deadline, an example being the Bengaluru-Satyamangalam Railway Line Project. As per the Ministry of Statistic & Programme Implementation, Infrastructure & Project Monitoring Division (IPMD), project delays are related to land acquisition and law-and-order issues.

To purchase 1,400 acres of land for the project, Indian Railways deposited Rs 403.79 crore. However, the Indian Railways have not yet received the land from the state government. If the railway projects would have been completed on time, then the rail infrastructure in India would have been more advanced and efficient by now. Moreover, due to law-and-order problems, the Indian Railways had to incur huge losses. According to the data from the Ministry of Railways, protests and law-and-order issues cost the Railways Rs 467.20 crore in the 2020-21 fiscal year. As part of their protest against the Agnipath initiative, students from Bihar, West Bengal, and other states set many railway coaches on fire, leading to losses of more than Rs 1,000 crore for the Indian Railways. The farmers' protest of last year also caused a loss of approximately Rs 37 crore for Indian Railways. According to railway officials, to build a train with 12 coaches, it costs roughly Rs 40 crore and to build a train with 24 coaches, it costs roughly Rs 70 crore. And this issue needs to be understood by the protesters. Low level of employee productivity, high staff wages and corruption also cause loss to Indian Railways. According to Metro Man E Shreedharan, if the purchases for Indian Railways were decentralized, there would be a saving of Rs10,000 crore.

The Government recently has come up with some initiatives like the National Rail Plan to increase the capacity of Indian Railways by the year 2030 to fulfil the future demand and to increase the number of railway lines and platforms in order to avoid the problem of traffic congestion. And the government has recognized privatization as the means to achieve this. Experts expect that privatizing Indian Railways will transform it completely and it will be able to compete with developed nations. The Union Railway Minister said that instead of complete privatization, private investment will be encouraged to increase the efficiency of Indian Railways. From 1st July, 2020, the government allowed 109 routes for private trains to run, which was the first step to open up the Indian Railways. And the government has also decided to manufacture these private trains in India as per the Make in India programme. According to the Indian Government, this step will lead to better accountability and responsibility of the Indian Railways. In the year 2020, the Indian Railways had set a target of achieving 100% electrification of railway tracks by the end of 2023, of which till now 81% is completed. Stoppage time at major terminals has also been reduced. Indian Railways also took some steps like constructing a Dedicated Freight Corridor and developing the WAG-12 engine to improve growth of freight transport. Although the Indian Government has taken a lot of revolutionary initiatives regarding reformation of the Indian Railways and to curb its losses, but much more needs to be done if India wants to develop railway services like China and Japan.