Lamphere was an original proponent of PSR because of his former role as the chairman of Illinois Central Railway, a freight … 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. 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. The financial health of the railways is determined by its Operating Ratio (OR). A measure of expenditure against revenue, the operating ratio shows how efficiently the railway is operating and how healthy its finances are. 0 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. 4. 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. 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. 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 The CAG report spelled out the impact of … 3.Is OR, best financial ratio to show the performance of Railways ? A lower figure of Operating Ratio is thus regarded better and is indicative of better financial health of the system. “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. “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. Operating Ratio can be decreased by reducing expenditure and augmenting income and efficiency. 2. This is the company's operating expenses as a percentage of revenue. © 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. 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. The operating ratio is a major measure of profitability in the railroad industry. CP’s operating ratio has been on a decreasing trend in recent years. 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). This financial ratio is most commonly used for industries which require a large percentage of revenues to maintain operations, such as railroads. Operating ratio is a key indicator of a commercial organisation’s financial health. The operating ratio of the Railways could register its worst performance ever since 2000-2001 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. O.R. It is calculated as ratio of working expenses to gross earnings. - Operating Ratio in Indian Railways . In the financial year 2019, the operating ratio of Indian Railways was at 97.29 percent. Edited excerpts from an interview with Sudheer Pal Singh:Based on your assessment of fiscal indicators like… An operating ratio of 98.44 per cent means that the railways spent Rs 98.44 to earn Rs 100. The railroad does not make operating ratio a key … hÞbbd``b`þ$f ÆH !,$Xö ÖÝ bˆ{ÄZ"î ¦“ ±>÷°é ˜™^‚Ìc`Ćm÷ éL 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. Thus, despite of charting out above 10% revenue growth plan, this budgeted OR of 92% seems to be unrealistic. Rail Budget 2016: Suresh Prabhu Misses Operating Ratio … Operating Ratio indicates how much railway spends to earn a rupee. 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. one rupee). A railway’s operating ratio represents the ratio of its operating costs to its revenue. It indicates how efficiently railways are able to earn with every rupee spent on development. Further, half of railways earnings generally go towards meeting wage and pensions. 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%. On the expenditure side, Railways was hoping that the figures would be around Rs 1.21 lakh crore. An Operating Ratio of 90% means that Railway is spending 90 paisa to earn 100 paisa (i.e. Despite efforts by Indian Railways, the national transporter may record its worst operating ratio at 98.5 per cent in year 2017-18. Operating Ratio indicates how much railway spends to earn a rupee. 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. CP’s operating ratio has been on a decreasing trend in recent years. %%EOF In finance, the Operating ratio is a company's operating expenses as a percentage of revenue. Published by Vaibhav Asher, Oct 16, 2020 In the financial year 2019, the operating ratio of Indian Railways was at 97.29 percent. Hence, Operating Ratio would have been at 99.54% instead of 96.50% (as shown by the railways). The key reason for 2% increase in budgeted OR is the additional burdens of Rs. The best ever OR of Indian Railways was 74.7% in 1963-64. However, for the last few decades, this ratio is lingering between 92 to 98.5%. 21,000 crore on account of 7th pay commission. 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 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%). This rose to 1.24 lakh crore in FY 19 at an operating ratio of 97.3%. According to the Union Budget, railways is eyeing an operating ratio of 95% in 2019-20, down from 97.3% a year ago. Metro Railway earnings mainly relates to passenger earnings and sundry earnings whereas in all Zonal Railways the bulk earnings comes from goods freight. How it is calculated ? Operating ratio indicates the organization/company’s operating expenses divided by its operating revenues, which helps to check its performance. endstream endobj 603 0 obj <. However, for 2016-17, the government has targeted an O.R. “Exclusion of this advance would otherwise have increased the operating ratio to 102.66 per cent,” the auditor said. 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%. one rupee). A lower figure of Operating Ratio is thus regarded better and is indicative of better financial health of the system. In rail road sector, an operating ratio of 80 or lower is considered desirable. 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. 602 0 obj <> endobj The last time Railways clocked operating ratio this bad was in years 2000-2002. It is also called the operating cost ratio or operating expense ratio. If answer is No, what is the reason and which one is the alternative one ? Worst Operating Ratio for Indian Railways in years! Railways' operating ratio, the direct indicator of working of the government-run transporter, could settle at 98.5% for 2017-2018. endstream endobj startxref File Photo The Operating Ratio of the Indian Railways … 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. 654 0 obj <>stream Raising passenger and freight fares are always politically sensitive issues. In railroading, an operating ratio of 80 or lower is considered desirable. 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. An operating ratio of 98.44 per cent means that the Railways spent Rs 98.44 to earn Rs 100. Workbook: Union Budget 2017 - … 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. A higher ratio indicates poorer ability to generate surplus. of 92%. (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 … Operating Ratio is an important indicator for Indian Railways. The Indian Railways’ staff and pension bill was 80,791 crore in FY15, when the operating ratio was 91.3%. During the observed time, … What is Operating Ratio ? While in 2000-2001 it was 98 per cent, the following year it improved to 96. 8,720 crore. However lower O.R. 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) The following year, it improved to 96. Norfolk Southern predicts operating ratio to improve at least 100 basis points in 2019 compared with 65.4% achieved in 2018. Income can be increased by raising fares and expanding its revenue streams. In 2007-08, the OR was 75.9% due to good economic growth and robust earnings from freight. Thereafter, the O.R. 6 By the 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%. 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. %PDF-1.6 %âãÏÓ 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. The operating ratio for Apple means that 78% of the company's net sales are operating expenses. 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. An operating ratio of 98.44 per cent means that the Railways spent Rs 98.44 to earn Rs 100. Computation of the Operating Ratio from the set of figures given in the problem. In 2014-15, the budgeted operating ratio was 92.5%, against which railways was able to achieve 91.3%. 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. Indian Railways’ operating ratio has stayed above 90% for the last few years. The national transporter’s worst performance in the last two decades was in 2000-2001 when its operating ratio was 98.3 per cent. The operating ratio — a measure of expenditure against revenue — is an important parameter to gauge the health of railway finances. During the observed time, the best performance was recorded in the … In 2015-16, the operating ratio is 90% mainly due to savings of Rs. The calculations of railway might go haywire due to absence of a solid road map to boost the earnings. Operating ratio - Canadian National Railway 2013-2019 Union Pacific Railroad - gross ton-miles 2013-2019 Norfolk Southern Railway - operating expenses by type 2019 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. 5 Accordingly, a lower operating ratio means a railway is incurring less operating cost per dollar of revenue. Similarly, in … Operating ratio (OR) is the amount of money the railways spends to earn each rupee. Apple's operating ratio must be examined over several quarters to get a … operating ratio means a railway is incurring less operating cost per dollar of revenue. Historically, an Operating Ratio of Indian railway was not a problem in 1960s and 1970s. 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. We note here that in 2008-09, when the railways had to implement the 6th Pay Commission report, the Operating Ratio had gone chaotic. went up to 88.3% in 2008-09 and 95.3% next year. Likely Questions: 1. 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. Least 100 basis points in 2019 compared with 65.4 % achieved in 2018 means that railway is less! 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