After improving to 97.45% in 2020–21, the operating ratio of Indian Railways remained elevated at 107.39% in 2021–22, 98.14% in 2022–23, 98.43% in 2023–24, 98.32% (revised estimate of 25% and 25%) for 82. 2025-26.
The operating ratio measures the operating efficiency of an organization by comparing its operating costs, such as fuel, salaries, and maintenance costs, to its operating income. The ratio indicates the amount spent on earnings ₹100. A higher ratio indicates a weaker ability to generate surplus, while a lower ratio allows the railways to direct more of their revenue towards capital expenditure.
Increase in income
While the railway’s pension liability has kept the operating ratio above 98% for the past few years, the national carrier’s rapid return to normalcy post-covid and growth in both freight and passenger revenue may give it enough room to post a further increase in internal revenue generation in 2026-27, pushing down the operating ratio, the first person cited above said.
The operating ratio should improve closer to 97.5% in 2026-27 and approach the 97.45% reported in 2021-22, he added.
Railways’ internal revenue generation is expected to remain flat in 2025-26 ₹3,000 crore, which could grow by 2026-27 along with passenger and freight revenues ₹3 trillion in the current fiscal year to ₹3.25-3.30 trillion in the next fiscal year.
The Gross Budgetary Support (GBS) is also expected to remain above 90% of the total allocation again, providing enough funds to bring the railways’ books in order by 2026-27, with the operating ratio improving closer to 97.45%, the latter said.
Queries emailed to the Railway Ministry remained unanswered till publication. However, the official said that more than 10% growth in revenue (passenger and freight) in the next fiscal year may increase the internal production (surplus) of the railways to more than ₹5,000 crore, which should bring the 2026-27 operating ratio below 98% for for the first time in five years.
“The true picture of Indian Railways can emerge only if the government takes the wage and pension burden into the general finances while allowing the railways to make capital investments through a combination of GBS and market borrowing in a more transparent manner. This would prevent the railways from disguising some of its revenue expenditure as capital expenditure, while private money would ensure that the funds are used effectively,” said V. Shanker, former executive director of railway planning.
“There is a need for railways to become more operationally efficient to achieve real improvement in operating ratio. Railways should also clearly account for all liabilities arising in their books to show gains in their finances. They should also determine the efficiency parameters of their high value projects like Vande Bharat trains, dedicated freight corridor etc,” said Subodh Kumar Jain, former board member (engineering).
Financial prudence
To improve the operating ratio, the railways must increase revenue while controlling expenditure. In the last five years, it has invested record capital expenditure to increase its capacity by creating new lines, doubling, purchasing/manufacturing wagons, wagons, locomotives, etc. The ministry has also set an ambitious target of three billion tonnes of loading by 2030.
The Ministry of Railways is also working to increase the share of other revenue (non-fare revenue) in its total revenue, which is now around 4%. The second effort includes revenue-maximizing initiatives such as expanding the commodity basket through the creation of Business Development Units (BDUs) at the ministries, zonal and divisional levels to better coordinate the movement of bulk commodities such as coal, and effective and innovative marketing strategies to capture more traffic.
Various initiatives like running of special trains, introduction of Vande Bharat and Amrit Bharat trains, increase in onboard capacity, introduction and rationalization of flexi fare system in premium trains, regular revision of reservation quota whenever required, expansion of alternative train accommodation scheme known as vikalp (optional) have also been taken to increase passenger revenue.
The Railways has also taken several measures to increase freight and non-fare revenue. These include introduction of Gati Shakti Multimodal Cargo Terminal Policy with liberalized provisions, vehicle investment schemes, launch of Goods Shed Rating Dashboard and introduction of e-auction policy for commercial earnings and non-travel revenue contracts.
In addition, e-commerce and FMCG segments have received special attention, including some popular commodities such as cosmetics, lithium-ion batteries and battery-powered vehicles under the red tariff. It has also issued revised guidelines under the Liberalized Automatic Freight Rebate Scheme to incentivize traffic loaded in the empty flow direction.
The Railways has also initiated several expenditure control measures aimed at achieving operational cost savings. Among other things, expenditure management efforts focus on better utilization of labor to improve productivity per capita, electrification of railway lines, rationalization of rolling stock repair and maintenance and efficient use of assets.
In addition, strict monthly expenditure monitoring is being done to ensure effective cost control, the second person said.
Electrification of railway lines helped the railways to save money ₹4,700 crore for diesel traction in 2023-24 alone.
