In last year’s Rail Budget, Railway minister Suresh Prabhu had said that the impact of the 7th Pay Commission would take the operating ratio to 92 per cent in 2016-17. In last year’s Rail Budget, Railway minister Suresh Prabhu had said that the impact of the 7th Pay Commission would take the operating ratio to 92 per cent in 2016-17.

Indian Railways has ended the financial year with its worst operating ratio in 16 years at 96.9 per cent—deteriorating even from its Revised Estimates in Budget. At one point during the last fiscal year, it did look like the transporter’s operating ratio (money spent to earn every hundred rupees; the lower the better) would touch, if not cross, the 100-mark. The last time Railways clocked operating ratio this bad was in years 2000-2002. Operating ratio is a key indicator of a commercial organisation’s financial health.

While in 2000-2001 it was 98 per cent, the following year it improved to 96. On the expenditure side, Railways was hoping that the figures would be around Rs 1.21 lakh crore. However, by March 31, it came to be even lower than that at 1.19 lakh crore—creating the scope for an improved operating ratio number, sources said.

For the Seventh Pay Commission payouts for 2016-17, around Rs 12,000 crore was budgeted, but eventually the impact stood at around Rs 8,000 crore, sources said. In last year’s Rail Budget, Railway minister Suresh Prabhu had said that the impact of the 7th Pay Commission would take the operating ratio to 92 per cent in 2016-17. However, eventually, it is the pay commission’s impact being less than anticipated that prevented the ratio from sliding further, sources said.

Even the Pension bill remained within Rs 40,000 crore, as against the budgeted Rs 42,000 crore, which made Railways book-keepers breathe easy. On the earnings side, even though the last fiscal remained tepid for most of the year, the freight earnings picked up pace in January and by March 31, Railways had managed to clock the highest monthly-figures in terms of loading. As a result, the total earnings stood in the region of Rs 1.65 lakh crore—translating into a much better Operating Ratio number than what had been feared.

The official wrapping up of the accounts for 2016-17 would take another couple of months but sources said the significant headline numbers were more or less frozen and only minor adjustments remained. By November last year, Railways’ operating ratio had reached a never-before 114 per cent sending alarm bells across zonal railways.

Even by February this year, a best-case-scenario of 98 per cent was being anticipated. Considering that, a figure of 96.9 per cent—in the Revised Estimates it was pegged at 94.9 per cent—is being viewed by the Railway Board as a good enough face saver, sources said. In any case, freight earnings generally pick up speed only in the last quarter, somewhat balancing out revenue shortfalls.

Railways wants to do away with Operating Ratio altogether by bringing in a different metric to measure its financial performance. It had formed a committee of officials and has engaged an international consultancy firm to firm up a new performance index.

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