State of the Railways: Are its finances in a mess?

The Indian railways have been looked at in the recent times as the biggest economic turnaround story. But is that something which is still continuing? Railway�s finances are in a critical state with rising operating ratio and declining cash surplus. Here�s a report from CNBC TV-18's Marya Shakil on the present state of railway's finances.

India Business Hour at 09:00 pm

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The Indian railways have been looked at in the recent times as the biggest economic turnaround story. But is that something which is still continuing? Railway�s finances are in a critical state with rising operating ratio and declining cash surplus. Here�s a report from CNBC-TV18's Marya Shakil on the present state of railway's finances.

Mamata Banerjee, Railway Minister said, �I am presenting the white paper.�

The white paper on Indian Railways by Mamata Banerjee punctured the turnaround story of her predecessor Lalu Yadav. Now it�s going from bad to worse. The cash strapped transporter is gradually losing its capacity to sustain itself. The railway board has been flashing warning signs since January 2010. The then Financial Commissioner Saumya Raghavan had called the financial position of railways critical.

In the General Manager�s conference, Banerjee said, "The financial position of the railways is very critical. There is no surplus fund with the railways."

Following this the Chairman of the railway board called for austerity. In a letter addressed to GMs on 30th November 2010 the Railways for the first time accepted that the situation was grim.

"No additional allotment can be given during this year. The earning scenario looks equally grim with a drop of about 10 million tonnes in loading up to October 2010."

Raghu Dayal, Railway Expert mentioned that the Prime Minister has also said that there has to be a balance between passenger and freight charges.

Are Railways' finances in a mess?

For the year 2010-11, Railways had set its earnings target around Rs 94,000 crore but till January end it had earned around Rs 76,200 crore still short of over 17800 crore.

The operating ratio which is the prime indicator of financial health is hovering around 95% higher than the budget estimate of 92%. The ratio had come down to 75.9% during Lalu Yadav's tenure of 2007-08.

From 25,000 crore in 2007-08, Railways' cash surplus declined to Rs 17,400 crore in 2008-09 in 2010-11 it was just Rs 1,328 crore.

Vivek Sahai, Chairman, Railway Board said, �We should go by what we are spending. We spent much more than any year on passenger amenities last year.�

The real picture would be out on the railway budget day. But a populist budget which Mamata is sure to be batting for addressing to her constituency in Bengal could bring more trouble to the financial managers at Rail Bhavan.

Also watch the accompanying video...