How Indian Railways powers its revenue engine
In FY25, the Indian Railways operating ratio is estimated to be 98.2%, meaning it will spend ₹98.2 to earn ₹100.
So, how does Indian Railways earn money?
Indian Railways has showcased its potential for resilience and growth, achieving a historic revenue of ₹2.56 lakh crore (~$30.8 billion) in FY24, marking a 6.6% increase over the previous year.
The surge in revenue is being powered by three key drivers
- Freight operations
- Passenger services
- Sundry revenue
Freight operations
Freight, which involves transporting goods and commodities by rail, is crucial in moving bulk items such as coal, cement, iron ore, petroleum products, and food grains over long distances.
Now, the increased use of freight operations has been a major factor behind the Indian Railway industry’s remarkable revenue surge, with earnings growing from $16.68 billion in FY16 to $19.47 billion in FY24.
Even amidst the challenges of the Covid-19 pandemic, freight traffic has steadily grown, with originating freight rising from 1,233.22 million tonnes (MT) in FY21 to 1,400.27 MT in FY22, and reaching 1,509.07 MT in FY23.
This growth is fueled by improvements in freight cargo transportation and the ongoing commissioning of the Dedicated Freight Corridor, which has notably reduced transit times.
Passenger service
In addition to freight, passenger services have emerged as another significant revenue contributor for Indian Railways.
Over the years, passenger revenue has grown from $6.90 billion in FY16 to $7.61 billion in FY24.
Although this growth has been slower than the nominal GDP growth rate and the rapid expansion in competing sectors like aviation, Indian Railways is still expected to earn ₹106.67 per passenger in FY25, nearly double the ₹54.62 recorded in FY16.
Also, the industry has experienced fluctuations in passenger volume, largely due to the pandemic. While passenger traffic saw a sharp decline, it has gradually recovered in the post-pandemic period, supported by ongoing efforts to enhance services and expand capacity.
Sundry revenue
Sundry revenue of the Indian railways is earned through the non-core operations of Indian Railways. These include:
- Advertisements on train coaches and railway stations
- Leasing of railway land, buildings, and other assets, for commercial purposes
- Catering services are provided on trains and at stations
- Parking fees for parking vehicles at railway stations
- Income from services like parcel handling, ticket booking commissions, and other non-core activities.
