Indian Railways to have improved Operating Ratio of 89-90% by 2021: CRISIL Research

NEW DELHI: The operating ratio of Indian Railways will improve to 89-90% by 2021 once the current investment starts bearing fruit, a CRISIL research report has said.

Railways currently has an operating ratio of 94%. Operating ratio indicates is the amount railway spends to earn 100 rupees. An operating ratio of 94% means railway is spending the same amount to earn Rs 100. The surplus amount is used by railways for development and capacity building works.

CRISIL believes the four-pronged strategy of plucking the low-hanging fruit by prioritizing and commissioning the vast backlog of projects, amounting to ~Rs. 3.3 trillion, standardizing and expediting project sanctioning to ensure a robust project pipeline and facilitating time-bound execution, transforming the DNA of the institute via greater empowerment and accountability to enhance efficiency and focusing on bolstering its own finances will help reinvigorate Indian Railways.

According to the report, railway financing is expected to be less of a constraint than in the past, given external funding–including institutional financing, multilateral borrowings and participation of stakeholders such as state governments and private players.

The research expects investment of Rs. 469 billion in coaches over FY16-20, with Linke Hoffman Busch (LHB) and self-propelled units preferred to improve safety and speed.

The report says during FY16-20, rail freight growth is expected to be 7-8% annually, compared with just 3-4% between FY12 and FY16 as more capacities come on line due to phased commissioning of the DFCs and ongoing network decongestion measures.