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Question: What exactly is meant by the operating ratio with respect to the Railways budget?
Answer. Operating ratio is the amount of rupees spent to earn 100 Rupees.
- If its less than 100 = you're making profit.
- If more than 100 =you're making losses.
For railways, Operating ratio for passenger trains used to be about Rs.75 earlier but now it is almost Rs.125. That means Railway is not making profit in passenger trains.
Because of this increase in Operating Ratio, Railway increases Freight charges (money charged on transport of goods such as coal, cement etc), to cover up the losses. This is called Cross-subsidization and it increases the inflation indirectly.
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