Indian Railways uses freight profit to cover passenger losses
Indian Railways leaned heavily on freight profits to mask its mounting passenger service losses in 2022-23, according to the latest audit by the Comptroller and Auditor General. The national transporter, which continues to serve as a lifeline for millions, reported a surplus on paper, yet its operational balance tells a more complex story of cross-subsidisation and financial strain.
The audit revealed that while Railways posted gross traffic receipts of ₹2,39,982 crore — a rise of 25.5 per cent over the previous year — a significant share of this gain came from freight. Coal transportation alone accounted for over half of the freight revenue, underlining the continued dependence of the sector on fossil fuel movement, even as India pushes for greener alternatives.
Operating costs, however, remained disproportionately high. Nearly three-fourths of working expenditure was consumed by salaries, pensions, and leasing charges on rolling stock. Revenue expenditure touched ₹2,37,659 crore, an increase of 15 per cent from the previous year, highlighting the pressure of fixed costs that show little flexibility for reform. Although the Railways projected a net surplus of ₹2,517 crore in 2022-23, this was achieved only by offsetting massive losses in passenger services through freight profits. Passenger operations alone recorded uncovered losses of ₹5,257 crore. The heaviest burden came from Sleeper, Ordinary and Second Class services, which together absorbed losses exceeding ₹51,000 crore. These classes remain the most accessible to low and middle-income groups, making the subsidy politically sensitive but financially unsustainable. The operating ratio, a critical measure of financial health, improved to 98.1 per cent from a worrying 107.4 per cent in 2021-22. While this signals better efficiency, auditors cautioned that the improvement was largely cosmetic, achieved by relying on freight surpluses rather than systemic cost control or revenue diversification.
The findings expose the structural challenge of running a railway that must remain affordable to the common citizen, yet financially viable in an era of rising costs. Experts note that heavy dependence on coal freight is at odds with national climate goals, raising questions about how sustainable this model will be as India transitions towards renewable energy and decarbonised industry. For cities and regions dependent on affordable passenger mobility, the Railways’ financial balancing act poses a larger societal question. If freight cross-subsidisation weakens in future, passenger fares may have to rise or services may be curtailed, potentially hitting the most vulnerable commuters hardest. For now, freight continues to keep passenger services afloat, but the long-term sustainability of this approach remains uncertain.
