Growth of Railway revenues falls in the last few years
Sai Krishna Muthyanolla
November 5, 2019
While the
overall revenues of Railways have increased in the last 10 years barring
2016-17, the growth rate of revenues has fallen in the last few years. Here is
a look at the numbers for the last 10 years.
Railwaysare the lifeline of India’s public transport and also contribute significantlyto the economy. A major share of the passenger traffic as well astransportation of goods & freight across the country is of the Railways.
Therevenue earned by Indian railways is a key component of non-tax
revenue of India and is used to meet the revenue expenditure of therailways along with funding infrastructure development and other capitalinvestments of the Railways.
Therefore,a continuous increase in revenue of railways is important to ensure that the growingexpenditure & investment needs are met. That will also ensure that theseinvestment needs do not become a burden on India’s budget.  In this story we explore the trends in railwayrevenue over the past decade.
The
growth rate of overall Railway Revenue has slowed down
Factlyhad filed an RTI application and received information in regard to the varioussources of railway revenue for the last 10 years.  As per this information, the provisionalrevenue for 2018-19 is ₹190.57 thousand crores (1.9 lakh crores). This is an increase over the previousyear where the actual total revenue as per the RTI information was ₹178.9 thousand crores.
Atthe beginning of the decade i.e. 2009-10, the revenue of the railways was ₹ 89.36 thousand crores. The overall annual revenue hasincreased every year barring 2016-17, when it was less than the revenue of2015-16 by about ₹2400 crores.
Rate
of growth of Railway revenues has slowed down over recent years
While,the annual revenues have increased during 9 of the last 10 years, the rate ofgrowth has reduced over the past few years. For the year 2010-11, the annualrevenue of railways has increased by 8.17% over the previous year. In thesubsequent years the rate of growth was more than the earlier years with2012-13 recording an annual growth rate of 18.87%.
Thenext two years, all though the annual growth rate was less, it was still indouble digit figures.  In the last fouryears, however, the annual growth rate of railway revenues has only been insingle digit. As highlighted earlier, there was a negative growth in 2016-17when the revenues shrunk by 1.46%.
Theprovisional annual growth rate for 2018-19 is estimated at 6.52% which is lessthan the previous year (2017-18)’s growth rate of 8.17%.
Revenues
from Goods forms the largest share of Railway revenues
Therevenue from transportation of goods average out to around 65% of the total railwayrevenue, for the last decade.  With sucha sizeable chunk of the total revenue, any variance in the revenue earned fromgoods had a direct impact on the trends of overall revenue.
Forthe year 2018-19, the provisional revenue for Goods was ₹127.43 thousand crores, which makes up to 66.87% ofthe total revenue. At the beginning of the decade in 2009-10, the revenue fromgoods was ₹58.5 thousand crores.
Apartfrom the blip in 2016-17, where the revenue earned was ₹ 4.87 thousand crores less than the previous year, theannual revenue from goods did increase every year over the last decade.
Incomefrom passengers forms the second highest source of revenue for the railways.  In 2009-10, the revenue earned from passengerstraveling by Indian Railways was ₹ 23.48 thousand crores. The annual revenues from thissegment witnesses an incremental increase every year and by 2018-19, theprovisional revenue earned through passenger traffic is ₹ 51.06 thousand crores.
Therevenues earned through other sources like sundry services, miscellaneous receiptsand other coaching services are marginal compared to the earlier two sources. Thetotal revenue earned from these three services in 2018-19 is ₹ 12.07 thousand crores.  There is a whole
list of heads that are classified as sundry services.These include rents, lease amounts of railway property, parking charges in railwaystations, sale proceeds of unclaimed or damaged goods etc.
Whilethe revenue earned from other coaching services and sundry services has beenlargely incremental every year, the revenue from Misc. receipts have taperedoff over recent years.
Theyear 2016-17, marks a standout year fir sundry services, wherein Indianrailways earned ₹10.37 thousand crores.
Growth
rate of revenue from goods largely influences the overall revenue growth
Ashighlighted earlier, revenue from goods forms a major portion of the overall revenueearned by Indian Railways. The inconsistency in the growth rates observed overthe decade in the overall revenues is largely contributed by theinconsistencies in the growth rates of revenue earned from goods.
Thefour-year period during 2011-15 has recorded growth rates in revenue through goodsservices in double digits with 10.67%, 22.60%, 10.14% and 12.66% for 2011-12, 2012-13,2013-14 and 2014-15 respectively.
Thisperiod was followed by low growth rate of 3.23% and negative growth of -4.46%in subsequent years. The growth rate in revenues through Goods services hasfared better over the last two years with 12.9% and 8.87% in 2017-18 and2018-19 respectively.
Lower
growth rates in revenue through Passenger services over past 4 years
Unlikerevenue earned through Goods services, the annual revenue earned throughPassenger services increased every year.  However, the rate of growth has slowed down inthe last four years.
Duringthe initial years of this decade the growth rate was 9.81% and 9.51% for2010-11 and 2011-12 respectively. During the next three years, the revenuesearned through passenger services have recorded a double-digit growth year onyear with 10.89%, 16.63% and 15.49% respectively. However, after these highgrowth years for revenues earned through passenger services, the growth rateshave fallen to single digit numbers over the last few years.  The growth rates for the last four years i.e.during the period 2015-19 were 4.96%, 4.51%, 5.11% and 4.98% respectively asnoted in the chart below.
Meeting
increased expenditure year on year is a challenge
Alook at railway
budget over the years reveals that a major portion of therevenue earned by the railways goes into meeting the working expenses.
TheRailway budget for 2019-20 estimates the total revenues at ₹ 216.93 thousand crores. Of this, the amount to bespent on working expenses is estimated at ₹ 205.5 thousand crores. A further 2.4 thousand crores areestimated for miscellaneous expenditure.
Furthermore,in her budget
speech for 2019-20, the Minister of Finance, Mrs. NirmalaSeetharaman has estimated that around ₹ 50 Lakh crores would need to be invested in Railwayinfrastructure between 2018-2030.  It isfurther estimated that the capital expenditure every year is going to be around₹ 1.5 to ₹ 1.6 lakh crores
Although a Public-Private partnership is proposed, currently a major burden of this capital outlay falls on the government. In this context, the lower growth rate in railway revenues is a cause of concern as it may lead to additional burden with government having to cough up money for railway infrastructure development.  With a high operational ratio of around 95%, Indian railways is treading a very fine line in managing its operational expenses with the revenues earned, let alone funding capital investments with its revenues. Hence, the need to increase the revenues and reduce the operational ratio are imperative.
Featured Image: Growth of Railway revenues in India