Issues with Indian Railways

Context: Indian has the fourth largest Rail network in the world. It is the largest passenger transport and employs more than a million people(Direct & indirect). It is not only an enabler of mobility but also contributes significantly to the overall GDP of the country.

Despite its significance and having such a long network, railway’s share in total surface freight transport in India is only around 30%.

The Indian Railways’ Issues

Operational Issues

  • Operating ratio of railways is very high. Operating ratio refers to the ratio of total operation expenditure to its revenues. High operating ration means the  revenues generated by the railways are able to meet only the operational expenditure leaving less scope for capital expenditure. Hence, Indian Railway(IR) entirely depends on budget support or market borrowings for capital expenditure.
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                             (Operation Ratio of Railways in the last decade)
  • Cross subsidisation: IR has kept passenger fares very low and cross-subsidised it by making freight expensive. This not only increased the logistic costs of manufacturing in India but also made our goods uncompetitive in the global market.
  • Congested Networks: India’s railway tracks are burdened by too many passenger trains often leading to route congestion. Since freight and passenger trains use the same network(barring few dedicated freight corridors) more than 40% of Indian Railways’ sections are used beyond 100% capacity. This resulted in low speed of freight trains. According  to CAG audit, the average speed of freight trains in India is below 30 kmph.
  • Competition from Roadways: High cost of transporting goods in railways coupled with low speed of freight trains shifted freight market towards roadways. This has been facilitated by expansion of Road infrastructure in the last two decades. The share of railways in India’s freight business has steadily decreased to approx. 27% from around  80% at the time of independence.
  • Confined to Bulk goods: IR mostly transports bulk goods like Coal, Cement, steel and Food grains etc where as fast moving consumer goods(FMCG) moved to roadways. With initiatives like “Coal linkage rationalisation” and “Decentralised Procurement” of food grains, the freight market of IR is expected to reduce further in the future.
  • Safety Issues: Anil kakodkar committee flagged safety issues in Indian railways due to low scope of capital expenditure and neglect of infrastructure maintenance.
  • Organisational Issues:
    • Burden of allied activities on IR like maintaining schools, hospitals and its own Police force.
    • Highly centralised decision making with less autonomy provided to zones.
    • There is a conflict of Interest in IR being both the regulator and operator and it hindered private investment in railways for fear of not having level playing field.

Steps taken by Government to Improve Railways

  • Augmenting revenues:
    • Tariffs of passenger trains were rationalised
    • IRCTC tied up with Amazon and MMT to attract more passengers
  • Merging of budgets: Merging of Railway budget with the main budget  not only reduced populism but also enabled railways to retaining the dividends with them(instead of giving back to the government) and utilise those resources for capacity building.
  • Improving Infrastructure:
    • Separate Dedicated freight corridors were constructed to de-congest the network.
    • Mission Raftaar to increase the average speed of freight trains
    • Rail Sanrakshan Kosh was constituted to eliminate manned and unmanned level crossing  and to introduce advanced signalling system.
  • Organisational Reforms:
    • Rail Development Authority was constituted to decide on Pricing of services and suggest measures to augment revenues.
    • Merged different services into one IRMS to encourage the fast and delivery-oriented decision-making process in the railways.

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