If the Rs 55,000 crore that the Railways lost in passenger subsidies in FY20 wasn’t bad enough—Railway Minister Piyush Goyal gave the number in Parliament recently—this is roughly equal to the amount the national carrier collects from passengers across the country.
In other words, on average, the level of subsidy on railway tickets is as high as 50%. Hardly surprising, then, that the Railways are in poor financial shape; the all-critical operating ratio—very broadly, the operating expenses divided by revenues—has continued to deteriorate, from 91.25 in FY15 to 97.4 in FY20; indeed, the FY20 budget target was 95%.
With operating expenses eating up almost all the revenues, the Railways has little left to invest. And, even this ratio may not be accurate since certain expenses are kept out; there have been no dividend payouts by the Railways for several years now, and the contribution to the depreciation reserve fund has also been falling. In FY18, the CAG had calculated the actual operating ratio to be well over 100.
A study by Debroy/Desai for FY15 had pointed out that, on an aggregate level, while buses charge Rs 1.78 per km for AC travel, trains charge a much higher Rs 2.52; on the other hand, in the Delhi-Lucknow segment, second-class train fare is Rs 185 versus a staggering Rs 420 by bus. In other words, the Railways is in danger of losing upper-end passenger travel by charging too much while it charges too little for the lower classes.
Another way to calculate this is to examine how much of the Railways resources are taken up by various types of travel and how much of revenues comes from these.