Jul 21, 2016

7% drop in IR Freight earnings despite 3% higher loading in June over the last fiscal

Why higher cargo loading in June is not enough to boost Q1 revenues? Though loading is up, distance covered is lower!

Railways Freight earningsNew Delhi: When it comes to cargo loading, it’s been a mixed bag for the Railways so far this fiscal.
For, despite recording 3 per cent higher freight loading in June over the same period last fiscal, the Railways saw a 7 per cent drop in earnings during the period.
This is because the average distance the cargo moves has come down 7 per cent. As a result, the throughput — measured by net tonne kilometre — also dropped 4.5 per cent.

So, in effect, for the quarter ended June 2016, cargo loading continued to be down marginally (by 0.46 per cent) against the same period last fiscal. The average distance covered by freight cargo movement during the period declined 8.4 per cent, with an 8.7 per cent drop in throughput. More importantly, freight earnings plunged over 10 per cent during the period.
From a freight loading perspective, June was a positive — railways freight loadings had dropped in April and May.
Raises concern
However, the first-quarter shortfall in revenues raises concerns about the total earnings of the Railways, given that the national transporter earns two-thirds of its revenue from the freight segment.
In fact, data for the April 1-July 10, 2016 period shows total revenues are down 6 per cent despite a 5 per cent improvement in passenger revenues. The increase in passenger earnings, in fact, muted the overall drop in revenues.
While the Railways has been targeting lighter and non-coal cargo, its charges are higher for heavier cargo.
As a result, revenue from lighter traffic — such as containers and automobiles — is much lower.
Chasing cargo
As it chases a bigger cargo share, the Railways has also been appointing key account managers for large customers.
Interestingly, in a recent conference, Railway Minister Suresh Prabhu expressed hope that Minister of State for Railways Manoj Sinha — who also got independent charge for Communications in the recent Cabinet reshuffle — would help the Railways garner parcel traffic from India Post, which has a wide network across the country.