Railways riding on higher freight rates, improved traffic

Frequent revisions in freight rates, coupled with a moderate revival in bulk commodities’ transport, have pushed Indian Railways’ (IR) freight earnings by 12.1 per cent to Rs 77,161 crore (Rs 771.61 billion) in the first three quarters of the current financial year over a year before.  

The growth last year over the same period was 10 per cent.

This year’s rise has come from only a five per cent rise in freight volumes.  

Freight earnings accounted for 65 per cent of IR’s total earnings of Rs 144,167 crore (Rs 1,441.67 billion) in 2013-14.

With economic activity starting to pick up, freight’s share in total earnings rose to 67 per cent in April-December 2014, as compared to the 64 per cent budgeted for the full year at the time of the year’s Rail Budget presentation in June.  

Officials said the increased earnings are in line with the railways ministry’s focus on freight, under new minister Suresh Prabhu.

“Two-thirds of our revenue comes from freight. So we are focusing on dedicated freight corridors,” Prabhu had told an industry gathering on Monday.  

IR’s freight traffic has grown by a little over four per cent annually over recent years, to 1,051 million tonnes in 2013-14. In the current financial year so far, the rise has been five per cent, to 808 mt.   

In the month of December 2014, freight earnings grew 13 per cent to Rs 9,775 crore. The bulk of this was attributed to more of coal transport — it accounts for 42 per cent of IR’s total freight earnings. They earned Rs 4,595 crore from coal transport in December, a 24 per cent jump over the Rs 3,694 crore earned from coal in the same month last year.   

“The railways has been increasing freight rates substantially. The full impact has started showing now. Hence the improved earnings,” said Amrit Pandurangi, senior director at consultancy firm Deloitte.

“The fact that this increase is coming on a mere five per cent rise in volumes indicates very high rates. The loss of market share, particularly in retail commodities, is a cause for worry.”  

The ministry had raised freight rates by 5.8 per cent in April 2013, 1.7 per cent in October 2013 and 6.5 per cent in June 2014. A congestion surcharge of 10 per cent is being levied on all goods traffic, including containers originating from ports, since November 2014.   

Pandurangi said the ongoing decline in diesel prices would also benefit IR. “But this also means road operators are far more flexible now in deciding the transport mode. We hope to see some positive impact on finances if the ministry’s recent decision of decentralising powers to General Managers includes pricing,” he said.  

Experts point to a decline in passenger volumes as another area of concern.

The growth in passenger earnings was 15.5 per cent in April-December 2014 over the same period a year before; last year’s comparative rise had been 20 per cent.

Also, the decline in passenger volumes has become sharper. It dipped 1.6 per cent in the first nine months of the current financial year, as compared to a 0.8 per cent fall in the same period of 2013-14.  

Overall, IR’s total earnings grew 12.5 per cent between April and December, as against 13.3 per cent growth in the same period of 2013, and 20 per cent growth in April-December of 2012.

The continued double-digit growth in earnings comes as the ministry struggles to achieve the current year’s budgeted Operating Ratio (money spent to earn Rs 100) of 92.5, as against 90.8 in 2013-14.