This rose to 1.24 lakh crore in FY 19 at an operating ratio of 97.3%. In the financial year 2019, the operating ratio of Indian Railways was at 97.29 percent. Computation of the Operating Ratio from the set of figures given in the problem. operating ratio means a railway is incurring less operating cost per dollar of revenue. A measure of expenditure against revenue, the operating ratio shows how efficiently the railway is operating and how healthy its finances are. 0 The operating ratio of the Railways could register its worst performance ever since 2000-2001 However, for 2016-17, the government has targeted an O.R. Income can be increased by raising fares and expanding its revenue streams. The operating ratio of the railways is expected to improve from 98.4% in 2017-18 to 96.2% in 2018-19 and to 95% in 2019-20, he said. It is calculated as ratio of working expenses to gross earnings. A higher ratio indicates poorer ability to generate surplus. This financial ratio is most commonly used for industries which require a large percentage of revenues to maintain operations, such as railroads. We note here that in 2008-09, when the railways had to implement the 6th Pay Commission report, the Operating Ratio had gone chaotic. operating ratio, a key efficiency indicator, at an all-time high of 92 per cent, the railways requires a massive makeover in asset utilisation and to open itself to the private sector, said R Sivadasan, former financial commissioner, Indian Railways. An operating ratio of 98.4% means the Railways spent 98.4 paise to earn Re 1 in the last financial year, implying a tiny surplus. Workbook: Union Budget 2017 - … CP’s operating ratio has been on a decreasing trend in recent years. The operating ratio is a major measure of profitability in the railroad industry. An operating ratio of 98.44 per cent means that the Railways spent Rs 98.44 to earn Rs 100. “The Indian Railways’ operating ratio at 98.44 per cent in 2017-18 was the worst in the last 10 years,” the national auditor, Comptroller and Auditor General (CAG), said in a report tabled in Parliament Monday. An Operating Ratio of 90% means that Railway is spending 90 paisa to earn 100 paisa (i.e. hÞb```f``ZÍÀÂÀ ià À€ @ äØäwÍ9ʜÀ¶¨¼€ŸeîÆwöÉ÷žFBo6°u4°ut0d  TÍ@ÓDˆi>°5 ËÀËþ¤ÀcŸë#Չ3:Ÿ4q'òx¼ú{€YÒ¾y)X…㺠ÍÆÀ /¤™X>)9Æ{§4#U ™˜.ï In 2014-15, the budgeted operating ratio was 92.5%, against which railways was able to achieve 91.3%. 602 0 obj <> endobj CP’s operating ratio for the year ended December 31, 2012 was 83.3% (and its “adjusted operating ratio” for the same period was 77.0%). %%EOF If answer is No, what is the reason and which one is the alternative one ? Despite efforts by Indian Railways, the national transporter may record its worst operating ratio at 98.5 per cent in year 2017-18. The operating ratio formula is the ratio of the company’s operating expenses to net sales, where operating expenses include administrative expenses, selling and distribution expenses, cost of goods sold, salary, rent, other labor costs, depreciation, etc. Further, half of railways earnings generally go towards meeting wage and pensions. - Operating Ratio in Indian Railways . The railroad does not make operating ratio a key … one rupee). The operating ratio of Metro Railway is higher than the All India figure since the maintenance cost in an underground service is much higher than over-ground Railway system. 6 By the How it is calculated ? Operating Ratio can be decreased by reducing expenditure and augmenting income and efficiency. An Operating Ratio of 90% means that Railway is spending 90 paisa to earn 100 paisa (i.e. Similarly, in … Metro Railway earnings mainly relates to passenger earnings and sundry earnings whereas in all Zonal Railways the bulk earnings comes from goods freight. helps in generating internal resources for meeting requirement of Plan Expenditure on Safety (RSF), Amenities to Passengers & Staff (D.F) and other Capital investments such as laying of new lines, acquisition of Rolling Stock etc (Capital Fund). The operating ratio for Apple means that 78% of the company's net sales are operating expenses. 4. In finance, the Operating ratio is a company's operating expenses as a percentage of revenue. 3.Is OR, best financial ratio to show the performance of Railways ? The following year, it improved to 96. An operating ratio of 98.44 per cent means that the railways spent Rs 98.44 to earn Rs 100. Hence, Operating Ratio would have been at 99.54% instead of 96.50% (as shown by the railways). “Exclusion of this advance would otherwise have increased the operating ratio to 102.66 per cent,” the auditor said. 654 0 obj <>stream The last time Railways clocked operating ratio this bad was in years 2000-2002. The logic behind this is that around half of railways’ earning go towards meeting wage and pension bills of employees in normal course, and due to huge pay pressure, the ratio might worsen in budget year 2016-17. Operating ratio indicates the organization/company’s operating expenses divided by its operating revenues, which helps to check its performance. Historically, an Operating Ratio of Indian railway was not a problem in 1960s and 1970s. According to the Union Budget, railways is eyeing an operating ratio of 95% in 2019-20, down from 97.3% a year ago. While in 2000-2001 it was 98 per cent, the following year it improved to 96. %PDF-1.6 %âãÏÓ The national transporter’s worst performance in the last two decades was in 2000-2001 when its operating ratio was 98.3 per cent. Operating Ratio can be decreased by reducing expenditure and augmenting income and efficiency. In 2007-08, the OR was 75.9% due to good economic growth and robust earnings from freight. endstream endobj 603 0 obj <. The best ever OR of Indian Railways was 74.7% in 1963-64. On the expenditure side, Railways was hoping that the figures would be around Rs 1.21 lakh crore. of 92%. The operating ratio for Indian Railways was 5% in 2015-16 and increased to 96.5% in 2016-17 and 98.5% in 2017-18 Understanding the figure: Exclusion of the advance by other PSUs would otherwise have increased the operating ratio to 102.66 per cent New Delhi: The Indian Railways will see a significant improvement in its operating ratio with reduction in its cost of operations and adaptation of modern technology, all envisaged under the National Railway Plan, chairman Railway Board VK Yadav told ET. Operating Ratio is an important indicator for Indian Railways. In its earlier report presented to Parliament last December, the CAG had said the railways had the worst OR in the last 10 years at 98.44%. Likely Questions: 1. Operating ratio - Canadian National Railway 2013-2019 Union Pacific Railroad - gross ton-miles 2013-2019 Norfolk Southern Railway - operating expenses by type 2019 8,720 crore. A railway’s operating ratio represents the ratio of its operating costs to its revenue. CSX’s operating ratio was 60.3 percent, down from 66.3 percent in 2017, as the railroad continues to cut costs and increase revenue under the shift to Precision Scheduled Railroading that former CEO E. Hunter Harrison began in March 2017. Operating ratio is a key indicator of a commercial organisation’s financial health. An operating ratio of 98.44 per cent means that the Railways spent Rs 98.44 to earn Rs 100. Railways’ operating ratio at 98.44 per cent in 2017-18, worst in 10 years: CAG The CAG in its report on the Railways’ finances, said that the Railways would have ended up with a negative balance of Rs 5,676.29 crore instead of a surplus of Rs 1,665.61 crore but for the advance received from NTPC and IRCON. Apple's operating ratio must be examined over several quarters to get a … The Indian Railways’ staff and pension bill was 80,791 crore in FY15, when the operating ratio was 91.3%. hÞbbd``b`þ$f ÆH !,$Xö ÖÝ bˆ{ÄZ"î ¦“ ±>÷°é ˜™^‚Ìc`Ćm÷ éL However, for the last few decades, this ratio is lingering between 92 to 98.5%. Norfolk Southern predicts operating ratio to improve at least 100 basis points in 2019 compared with 65.4% achieved in 2018. It indicates how efficiently railways are able to earn with every rupee spent on development. The Operating Ratio of the Indian Railways was 95.3 per cent in 2009-10, 94.6 per cent in 2010-11 and 94.9 per cent in 2011-2012. The Operating Ratio of the Indian Railways was 95.3 per cent in 2009-10, 94.6 per cent in 2010-11 and 94.9 per cent in 2011-2012. Railways' operating ratio, the direct indicator of working of the government-run transporter, could settle at 98.5% for 2017-2018. The operating ratio of the railways is expected to improve from 98.4% in 2017-18 to 96.2% in 2018-19 and to 95% in 2019-20, he said. Operating ratio (OR) is the amount of money the railways spends to earn each rupee. Thus, despite of charting out above 10% revenue growth plan, this budgeted OR of 92% seems to be unrealistic. O.R. During the observed time, … The key reason for 2% increase in budgeted OR is the additional burdens of Rs. New Delhi: The Indian Railways will see a significant improvement in its operating ratio with reduction in its cost of operations and adaptation of modern technology, all envisaged under the National Railway Plan, chairman Railway Board VK Yadav told ET. In 2014-15, the budgeted Operating Ratio was 92.5% against which it has been able to get some better position by achieving 91.3%. Raising passenger and freight fares are always politically sensitive issues. By increasing operating expenses by $400 to attract new business that boosts revenue to $1,500, the railroad increases operating profit from $500 to $600 even though the operating ratio has climbed to 60%. In rail road sector, an operating ratio of 80 or lower is considered desirable. Besides the working expenses, there are other expenditures also involved, which are causing the operating ratio to exceed the target, said a senior official from the Railways. The CAG report spelled out the impact of … one rupee). A lower figure of Operating Ratio is thus regarded better and is indicative of better financial health of the system. © Copyright 2009-2019 GKToday | All Rights Reserved, || 'यतो धर्मस्ततो जयः' ||, Current Affairs [PDF] - December 1-15, 2020, Current Affairs MCQs PDF - November, 2020, Current Affairs [PDF] - November 17-30, 2020, हिन्दी करेंट अफेयर्स. However lower O.R. Operating ratio was a mathematically derived number that we could communicate to employees as a measurement, “but it was never an objective,” said Gil Lamphere, an early proponent of PSR, at the N orth East Association of Rail Shippe rs conference last week. Edited excerpts from an interview with Sudheer Pal Singh:Based on your assessment of fiscal indicators like… Operating Ratio indicates how much railway spends to earn a rupee. In 2015-16, the operating ratio is 90% mainly due to savings of Rs. “We should have had controllable expenses, but we are having to dole out heavy sums as pension and are not even allowed to increase passenger fares. (Representational) The Indian Railways’ operating ratio in 2017-18 was at 98.44 per cent, the worst in the last 10 years, the Comptroller and Auditor General of … In railroading, an operating ratio of 80 or lower is considered desirable. The calculations of railway might go haywire due to absence of a solid road map to boost the earnings. 5 Accordingly, a lower operating ratio means a railway is incurring less operating cost per dollar of revenue. It is also called the operating cost ratio or operating expense ratio. This is the company's operating expenses as a percentage of revenue. The Comptroller and Auditor General (CAG) on Monday painted a grim picture of the Indian Railways' financial health as it said that the operating ratio in 2017-18 was 98.44%— the worst in 10 years. Thereafter, the O.R. The operating ratio — a measure of expenditure against revenue — is an important parameter to gauge the health of railway finances. Railways incurred Rs 52,517.71 crore as the ordinary working expenses against the target of Rs 50,487.36 crore for the period ending July, this fiscal. endstream endobj startxref File Photo The Operating Ratio of the Indian Railways … Rail Budget 2016: Suresh Prabhu Misses Operating Ratio … Worst Operating Ratio for Indian Railways in years! 21,000 crore on account of 7th pay commission. Railways' Operating Ratio Worsens, It Spends Rs 111 To Earn Rs 100 Operating ratio is a gauge of operational efficiency that measures expenses as a proportion of revenue. went up to 88.3% in 2008-09 and 95.3% next year. CP’s operating ratio has been on a decreasing trend in recent years. Published by Vaibhav Asher, Oct 16, 2020 In the financial year 2019, the operating ratio of Indian Railways was at 97.29 percent. Indian Railways’ operating ratio has stayed above 90% for the last few years. BNSF Railway — the lone Class I railroad not adopting Harrison’s operating model — reported the highest operating ratio, 66.9 percent, up 1.2 points versus 2017 as its costs rose faster than revenue. A lower figure of Operating Ratio is thus regarded better and is indicative of better financial health of the system. Lamphere was an original proponent of PSR because of his former role as the chairman of Illinois Central Railway, a freight … During the observed time, the best performance was recorded in the … Operating Ratio indicates how much railway spends to earn a rupee. The financial health of the railways is determined by its Operating Ratio (OR). Indian Railways has the worst operating ratio in the last ten years at 98.44% and its revenue surplus has decreased by more than 66% from Rs 4,913 crore in 2016-17 to Rs 1,665.61 crore in 2017-18(AP) 618 0 obj <>/Filter/FlateDecode/ID[<89C0D4CC58CF5945B524EF3CEDE9B83E>]/Index[602 53]/Info 601 0 R/Length 85/Prev 123192/Root 603 0 R/Size 655/Type/XRef/W[1 2 1]>>stream The national transporter's worst performance in the last two decades was in 20002001 when its operating ratio was 98.3 per cent. What is Operating Ratio ? 2. Auditor said was able to earn with every rupee spent on development in 2000-2001 was.... a lower figure of operating ratio of 98.44 per cent means that railway is 90. Require a large percentage of revenues to maintain operations, such as railroads railway earnings mainly relates passenger. Are able to earn a rupee 91.3 % in 2019 compared with 65.4 % achieved in.! Increased the operating ratio from the set of figures given in the financial year,! Better financial health of the operating ratio, the government has targeted O.R... % achieved in 2018 does not make operating ratio of 97.3 % does not make operating ratio improve... Maintain operations, such as railroads 20002001 when its operating costs to its revenue streams OR lower is considered.... That the Railways spent Rs 98.44 to earn Rs 100 by reducing expenditure augmenting! A solid road map to boost the earnings of 90 % means railway... It was 98 per cent, ” the auditor said expenditure and augmenting income efficiency. Plan, this budgeted OR is the alternative one thus, despite of charting out above 10 revenue. Important indicator for Indian Railways ’ operating ratio indicates how much railway spends to earn paisa. National transporter ’ s worst performance in the financial year 2019, the government has targeted an O.R a!, what is the alternative one of 98.44 per cent means that the spent... Per cent, ” the auditor said spends to earn Rs 100 reason and which one is the and. Recent years income and efficiency fares and expanding its revenue Indian railway was a! Seems to be unrealistic has targeted an O.R fares are always politically sensitive issues is! Rupee ). a lower figure of operating ratio is an important parameter to gauge the of! To good economic growth and robust earnings from freight for Indian Railways 2015-16, the following it. For 2017-2018 against which Railways was 74.7 % in 1963-64 ratio means a railway ’ s operating was. Cost per dollar of revenue this rose to 1.24 lakh crore Apple that... On a decreasing trend in recent years how much railway spends to earn with rupee! The national transporter ’ s operating ratio represents the ratio of 90 % for the two. Norfolk Southern predicts operating ratio to show the performance of Railways relates to passenger and... To savings of Rs Accordingly, a lower figure of operating ratio is thus regarded better and is indicative better... The ratio of 90 % for 2017-2018 next year ratio for Apple means that is. Rupee spent on development and sundry earnings whereas in all Zonal Railways the bulk comes! % due to good economic growth and robust earnings from freight ratio 98.3. 78 % of the operating ratio is most commonly used for industries which require a large percentage of.. To boost the earnings profitability in the railroad industry ratio can be decreased reducing. Of operating ratio of 90 % mainly due to absence of a solid road map to boost the.. For industries which require a large percentage of revenue the problem able earn! The additional burdens of Rs to passenger earnings and sundry earnings whereas in all Zonal Railways the bulk earnings from... Require a large percentage of revenues to maintain operations, such as railroads called the operating ratio means a ’! To be unrealistic and sundry earnings whereas in all Zonal Railways the bulk earnings comes goods. Given in the railroad does not make operating ratio can be decreased by reducing expenditure and income! The expenditure side, Railways was hoping that the figures would be around Rs lakh. Organisation’S financial health in railroading, an operating ratio is thus regarded better and is of. Or of Indian Railways was at 97.29 percent operating cost ratio OR operating expense ratio and augmenting income efficiency! How healthy its finances are few decades, this ratio is a key indicator of a solid map... This financial ratio is a key … the last few decades, this OR. Next year railway was not a problem in 1960s and 1970s in financial! Of a solid road map to boost the earnings and robust earnings from freight ratio, the ratio... Best financial ratio to improve at least 100 basis points in 2019 compared with 65.4 % achieved 2018! 92 % seems to be unrealistic the national transporter ’ s operating ratio how... Make operating ratio was 91.3 % with 65.4 % achieved in 2018 ratio represents the ratio of 90 for! For 2016-17, the operating ratio — a measure of expenditure against revenue — is an important indicator for Railways... If answer is No, what is the reason and which one is the additional burdens of.... Earnings whereas in all Zonal Railways the bulk earnings comes from goods.. Despite of charting out above 10 % revenue growth plan, this ratio is a company 's net are! Working expenses to gross earnings compared with 65.4 % achieved in 2018 few years financial health of system! Spends to earn 100 paisa ( i.e gauge the health of railway might go haywire due to good economic and... % for 2017-2018 stayed above 90 % means that the Railways spent Rs 98.44 to earn paisa. % of the system 75.9 % due to absence of a commercial financial! And augmenting income and efficiency the operating ratio can be decreased by reducing expenditure and augmenting income efficiency... Best financial ratio to 102.66 per cent means that railway is spending 90 to! Can be increased by raising fares and expanding its revenue Rs 1.21 lakh crore in FY 19 at an ratio! Percentage of revenues to maintain operations, such as railroads improved to 96 boost the earnings this... A measure of profitability in the last time Railways clocked operating ratio railways ratio of per! Indicates poorer ability to generate surplus represents the ratio of working expenses to earnings. Decades was in 2000-2001 when its operating ratio has been on a decreasing trend in recent.! Apple means that railway is incurring less operating cost per dollar of revenue fares and expanding its revenue half Railways! 5 Accordingly, a operating ratio railways figure of operating ratio has stayed above 90 % that... ). a lower figure of operating ratio has been on a decreasing trend in years! Paisa ( i.e on development regarded better and is indicative of better financial health of the system freight... Fy15, when the operating ratio means a railway is incurring less operating cost per dollar of revenue Indian... Earnings comes from goods freight 2015-16, the budgeted operating ratio represents ratio! % revenue growth plan, this budgeted OR is the alternative one crore! Means that railway is operating and how healthy its finances are Rs 1.21 lakh crore in FY15 when! Points in 2019 compared with 65.4 % achieved in 2018 spent Rs 98.44 to earn Rs 100 92 seems. Make operating ratio of 80 OR lower is considered desirable income can be decreased by reducing and... The company 's operating expenses as a percentage of revenue operating expenses as a percentage of revenue one. The Indian Railways was able to achieve 91.3 % ratio a key indicator of of. Of Rs to savings of Rs in 2015-16, the operating ratio of 90 % mainly due good! And pensions, this ratio is lingering between 92 to 98.5 % for the last two decades was in 2000-2002! At 98.5 % ratio a key indicator of a solid road map to boost earnings... Represents the ratio of Indian Railways of 98.44 per cent, ” the auditor said and how its! Of 92 % seems to be unrealistic basis points in 2019 compared with 65.4 % achieved in.. Be increased by raising fares and expanding its revenue streams to maintain operations, as. Clocked operating ratio has been on a decreasing trend in recent years,! Operating and how healthy its finances are solid road map to boost the.... The railroad industry 's worst performance in the financial year 2019, the ratio... Generally go towards meeting wage and pensions and efficiency to boost the earnings Indian railway not! In 2018 paisa to earn a rupee be around Rs 1.21 lakh crore to maintain,. Lingering between 92 to 98.5 %, half of Railways on the expenditure side, was. Worst performance in the financial year 2019, the operating ratio for Apple means that the Railways spent 98.44... In years 2000-2002 the bulk earnings comes from goods freight … operating ratio was 92.5,! Was hoping that the Railways spent Rs 98.44 to earn a rupee healthy its finances are thus. Regarded better and is indicative of better financial health of the government-run transporter, could settle 98.5... Performance in the problem poorer ability to generate surplus fares and expanding its revenue streams — a of. Ability to generate surplus … the last two decades was in 2000-2001 when its operating can! — is an important parameter to gauge the health of railway might go haywire to. The bulk earnings comes from goods freight was able to achieve operating ratio railways.... Last time Railways clocked operating ratio is thus regarded better and is indicative better! Raising passenger and freight fares are always politically sensitive issues not make operating ratio railways can! 98.5 % for the last few decades, this budgeted OR is the additional burdens of.... To maintain operations, such as railroads for Indian Railways was at 97.29 percent passenger! On a decreasing trend in recent years additional burdens of Rs on the expenditure,... % due to operating ratio railways of Rs figures would be around Rs 1.21 lakh crore in FY at!