Indian Railways Near Bankrupt

[csmart 472]

As per article on MSN, Indian Railways is heading for bankruptcy.

i had doubts abt railway profit since Lalu's regime. because, earning swere high but growth of passenger traffic was not proportionate to earnings. further he also sold many raliway land in order to show more earnings and fairs were also hiked.

now this is serious problem as there is huge increase in expenditure and reduction in earnings.

the article is given below. Original article

Indian Railways headed for bankruptcy

In fact, last year too, the Railways had failed to provide even a single rupee to its Capital Fund, which is used for buying new assets.

Those managing the Railways' finances, and currently engaged in preparing the forthcoming Rail Budget, are a worried lot. Top sources in Rail Bhavan say the Railways now has a net deficit of around2,500 crore. "While our expenditure has gone up by almost1,330 crore, our earnings are down by1,142 crore," says a Railway Board official.

Officials point out that the finances took a1,000 crore hit due to the two hikes in diesel prices this fiscal, while the 2 per cent hike in Dearness Allowance and the increase in number of days for the Performance Linked Bonus raised their expenditure by around400 crore. However, it is the sharp drop in freight business, almost by700 crore, that has come as the real shocker.

The Railways' operating ratio (the sum of money spent to earn a sum of100) is the best indicator of its financial health. In 2001-02, the operating ratio had reached as high as 96 per cent. But then, the Railways made dramatic improvements to bring it down to 75.9 per cent in 2007-08. In 2008-09, it again deteriorated, to 90.5 per cent, and then to 94.7 in 2009-10. This year, the operating ratio is threatening to increase well beyond 94 per cent, sources add.

It is not as if the crisis has suddenly developed. Warning bells were sounded as early as March 2010 when the then financial commissioner, Sowmya Raghavan, raised the red flag.

"If the trend of spending more and earning less continues, not only the internal generation of funds suffers but there is a very serious threat of Railways defaulting on the dividend payment liability, which all of us would like collectively to avoid and not find ourselves in. We have already scraped the bottom of the barrel and the fund balances have all been utilised. So there are no savings to meet shortfall in internal generation targets," Raghavan had told a gathering of all the general managers of the Indian Railways then.

Raghavan had further concluded that "in the final analysis the performance of the Organisation would be just at the bottom line" and that "unless we are in a position to control the Expenditure and increase the Earnings on a sustained basis, survival for the Organisation becomes a very difficult proposition".

In 2010-11, the Railways hope to earn close to94,565 crore. But after deducting its ordinary working expenses, pension liability and contribution to the Depreciation Reserve Fund (DRF), it will be left with7,465 crore.

From that money too, the Railways will have to shell out around6,600 crore to pay its annual dividend to the government of India, leaving only865 crore in its coffers (see box). The last time Indian Railways defaulted on paying the dividend was in 2001.

But in case it pays up the dividend, all the Railways will be left with would be865 crore, from where it will be required to appropriate money to the Development Fund and the Capital Fund. "The appropriations to the Development Fund and the Capital Fund would be hit this year," admits a top official in Rail Bhavan.

Sources say that it is the Miscellaneous Receipts worth2,500 crore which the ministry is banking on. "We have estimated a final excess of3,173 crore this fiscal. Of that2,800 crore will got to the Development Fund while the remaining373 crore will go to the Capital Fund," an official claimed.

However, given its current run, chances of the Railways earning an excess of3,173 crore look bleak. Last year, out of a budgeted excess of2,642 crore , it had managed to achieve only951 crore.

Source: Indian Express

[Greatest 55]

Welcome to India guys... Bureaucracy will never change...

[rajanmehta 4,056]

The moment read the title NEAR BANKRUPT, first thought was to cancell all those tickets and get the refund...Kya pata badme vapas mile na mile...

Media Sure Knows how to add MASALA to a simple, known to everyone STORY...

Bankrupcy means The Liabilities are so Large that there is no chance of repaying the Debts fully even if all Assets are Sold...

And How Can a Govt. of India Enterprise be Bankrupt till the Govt. itself is BANKRUPT..?

Here the issue is lack of funds for Capital Expansion Programmes of Railways and Not Bankrupcy..

In fact, last year too, the Railways had failed to provide even a single rupee to its Capital Fund, which is used for buying new assets.

In 2010-11, the Railways hope to earn close to94,565 crore. But after deducting its ordinary working expenses, pension liability and contribution to the Depreciation Reserve Fund (DRF), it will be left with7,465 crore.

From that money too, the Railways will have to shell out around6,600 crore to pay its annual dividend to the government of India, leaving only865 crore in its coffers .

It's Revenue is still more than expenses...And it is Only after paying dividend to Govt of India of Rs 6,600 Crore that a small balance is left for Capital Expenditure...

The Whole Article does not say anything about Railways Liabilities and Assets.....To Consider it as Bankrupt...

Hell..if we go by MSN Defination of Bankrupcy...Govt. Of India is Already Bankrupt...Every Year in Budget, The Expenses are more than Revenue...And there is deficit financing...

[ravi_patent 28]

whatever rajan said is absolutely correct

but every crises is an opportunity to reform

the reforms started in 90s were a response to foreign exchange crisis..

2g mess is another example

virtues of democracy (indian style)

[Karthik R 246]

The Railway can be called as the Lifeline of the Nation as it carries over 20 million passengers & 2 million tones of freight everyday. There is no way they can run bankrupt (unless of course A. Raja is given charge of the portfolio) as there is the Govt. to bail them out.

This report should be seen as a conspiracy hatched by Microsoft to tarnish the face of India, to avenge the poor sales of Windows powered mobile here

[csmart 472]

its not microsoft.. the article is taken directly from Indian express.

Indian Express Link

as regards to definition, there can be many. overhere, the whole point is different. i just copy/pasted the article with its title.. besides, read it carefully. ministry is looking for generating revenue from non core business which may be for short time and may not be good for railways in long run. further if railways pays to govt. then it will nto have enough for capital and development expenses. if it does not pay to govt, then govt will be face additional deficit.. railways is a major cash earner for GOI.

you cannot say that Railways bankrupt means GOI is also bankrupt. there are many cos, 100% own by GOI that have gone bankrupt in the past and that does not mean GOI is bankrupt.

[kshah 452]

66 lakh crore in swiss bank and expect railway to go bankrupt for 6600 crore??? What a joke. Sensationalizing each and every information is trend.

[commonman 228]

you cannot say that Railways bankrupt means GOI is also bankrupt. there are many cos, 100% own by GOI that have gone bankrupt in the past and that does not mean GOI is bankrupt.

Indian Railways is not a Company.

It is a Department of the Govt of India and part of the Ministry of Railways.

While a wholly owned Govt. Co. (where Govt. liability is limited to the value of the Shares subscribed) can definitely go bankrupt, a Govt. Department can not go bankrupt on its own. Its fate is linked to the Govt. itself.

[thilak.kmb 19]

you cannot say that Railways bankrupt means GOI is also bankrupt. there are many cos, 100% own by GOI that have gone bankrupt in the past and that does not mean GOI is bankrupt.

Indian Railways is not a Company.

It is a Department of the Govt of India and part of the Ministry of Railways.

While a wholly owned Govt. Co. (where Govt. liability is limited to the value of the Shares subscribed) can definitely go bankrupt, a Govt. Department can not go bankrupt on its own. Its fate is linked to the Govt. itself.

Just consider the value of the assets the railways have. The rolling stock alone may be worth several billions not to speak of real estate.

There may be fund crunch. But never a bankruptcy.

This is a malicious report.

Edited January 10, 2011 by thilak.kmb

[ACS 130]

Lets remove the term 'Bankruptcy' as the debate is now heading on the technicalities...

Now, is anyone still thinking (backed with proof) that the report is malicious in nature & the figures quoted wrong ?

I hope so, else this will seriously dent the image of Railways & make our commuting life more difficult..

Whatever goodies/luxuries we were experiencing in the last regime maybe withdrawn, as it may not justify the earnings.

So forget if its bankrupt OR having NIL Profit, we are anyways in for trouble..

BTW.. I dont know what Lalu spoke in Harvard & other such B Schools.. i hope they learnt nothing !

[vishalmcp 8]

as always we cant except anything from our so called Indian Government... only thing they can show is loss, loss & loss....

[digitalnirvana 646]

We are all wrong in slating Lalu for this mess. Infact the operating profit increased manifold under his tenure due to one single reason - focus on freight. Freight is the single largest contributor to revenue in India because passenger revenues are low due to 1) political compulsion of keeping ticket prices low/unchanged and 2) significant loss of revenue due to ticketless passengers.

The railways were in black under Lalu. They are in red under the current railway minister. I say this inspite of being from same state as the minister. There has been no focus on freight corridor, only focusing on cheap politics. Launching hundreds of trains and inaugurating new projects each day because assembly elections are near in WB.

Just go and see what shambles Calcutta Metro is in under her tenure. The next railway minster will have tough job, but will get that job soon as present railway minister will become chief minister.

PS Kesav please edit the bankrupt spelling in the header.

[rajanmehta 4,056]

Two things which i never knew before...

I say this inspite of being from same state as the minister.

.....That Bangalore is in West Bengal

PS Kesav please edit the bankrupt spelling in the header.

.....And Kesav has become Moderator, Otherwise how can he edit the header...

BTW otherwise very correct observations, Dipan...

[Pulkit Gupta 47]

Lalu was responsible but not for losses but for the excellent way of increasing profit.Bankruptcy, lack of funds they are just impossible railways per day sales is in lakhs crores so no lack of fund. and there main profit is tatkal quota. lalu increased the seats by almost double and triple making them earn huge profits as govt charge special fee for tatkal at no special expense. there daily income from tatkal alone is enough. But still they will never show profits after all yeh India hai.

[commonman 228]

The main means of increasing profit during Lalu regime was the innovative way in which passengfers were robbed in the name of tatkal scheme.

They increased the tatkal time to 5 days (against earlier 2), reserved 10% of all berths (against earlier scheme of 2 berth per coach) for tatkal, created a waiting list category for tatkal and introduced the up-gradation scheme with resultant vacancy again going to tatkal.

Now, if we keep in mind that under tatkal no concessions are applicable, the fare is charged from the train's initial to final station irrespective of the number of stations actually travelled, in addition a minimum additional charge of Rs.150 (for sleeper) and Rs.300 (for higher classes), its quite easy to compute the amount of money robbed from the hapless passengers who were forced to buy tickets under tatkal that were earlier available at normal rates.

Now thankfully, the robbing in the name of tatkal has stopped.

Edited January 11, 2011 by commonman

[ACS 130]

^^^ Yeah.. i back that.

Middle class was indirectly robbed in the Tatkal scheme..

But yes, there were huge profits made with changes in Freight policy.. thats total paisa wasool for the nation !

Hope all's going in the right pockets..

And finally, its the think-tank (bureaucrats & committees) that innovate OR cause blunders, Ministers simply sign/approve & take Credit at B Schools as if it was their own idea.. which is understandable, happens everywhere...

Edited January 13, 2011 by ACS

[digitalnirvana 646]

Two things which i never knew before...

I say this inspite of being from same state as the minister.

.....That Bangalore is in West Bengal

PS Kesav please edit the bankrupt spelling in the header.

.....And Kesav has become Moderator, Otherwise how can he edit the header...

BTW otherwise very correct observations, Dipan...

Rajan bhai, good spot. I am from Kolkata but now staying in Bangalore. And yes my bad, I forgot only mods can edit the header.

[commonman 228]

But yes, there were huge profits made with changes in Freight policy.. thats total paisa wasool for the nation !

Hope all's going in the right pockets..

The biggest increase in freight rates during Lalu regime was in foodgrains freight. About 69% increase in 18 months. Now considering that most movement of foodgrains is paid out of Food Subsidy, it amounts to taking from one pocket and putting in other. It only created profit for railways by increasing deficit on the Union Budget.

[csmart 472]

Lalu had also started charging Rs 20 is you book a tix from location different from journey starting point. in other words, if you book a round trip, then you pay Rs 20 extra of return trip. this is still there.