THE COMPTROLLER and Auditor General of India in its report on Railways’ finances tabled in Parliament noted that the Indian Railways’ operating ratio of 98.36% in 2019-2020 does not reflect its true financial performance and if the actual expenditure on pension payments is taken into account, the ratio will be 114.35 %.
About Operating Ratio:
OR represents the ratio of working expenses to traffic earnings and a higher ratio indicates poorer ability to generate surplus.
Findings of the CAG:
Issues in Receipt:
Last year, the Indian Railways was able to lower its expenditure and make up for the shortfall in traffic through revenue generated by freight operations.
The CAG report noted that against a target of 95% in the budget estimates, the operating ratio of the Indian Railways was 98.36% in 2019-20.
During 2019-20, the Indian Railways generated total receipts of Rs 1,74,694 crore against budget estimates of Rs 2,16,935 crore.
It could not achieve even the revised estimate target of Rs 2,06,269 crore.
The total receipts decreased by 8.30% during 2019-20 as compared to the previous year.
There was heavy dependence on transportation of coal which constituted around 49% of the total freight earnings during 2019-20.
Poor Proceedures:
Indian Railways failed in achieving automation of budgetary control through implementation of Integrated Payroll and Accounting System (IPAS).
There was lack of proper validation control besides absence of extant provisions inbuilt into IPAS for efficient delivery of output.
Recommendation of CAG:
Diversification of Freight basket:
Any shift in bulk commodities transport pattern could affect the freight earnings significantly.
CAG has also recommended taking steps to diversify their freight basket to enhance freight earnings and also consider exploiting its idle assets to increase other earnings.
Better Accounting Practice:
CAG has emphasised the need to ensure that surplus and operating ratio represent a true picture of its financial performance.
Increasing Fare:
In order to tide over the losses, it has suggested increasing the train fare.
National carrier needs to revisit the passenger and other coaching tariffs to recover the cost of operations in a phased manner.
Financing of Indian Railways:
Indian Railways is financed through: About Doping Its own internal resources (freight and passenger revenue, and leasing of railway land),
Gross Budgetary support (GBS) from the central government,
Extra budgetary resources (EBR): Primarily borrowings but also includes institutional financing, public private partnerships, and foreign direct investment).
Government Actions to improve the Railway Finances:
A National Rail Plan (NRP) 2030 has been developed with a view to develop infrastructure by 2030 to cater to the traffic requirements upto 2050.
Indian Railway Finance Corporation (IRFC) is mobilizing resources with sufficient moratorium period and projects are being targeted to be completed well before expiry of moratorium period.
super–critical (58) and critical projects (68) have been identified and prioritized.
onus clause for early completion, measures to improve cash flows and recognition of credentials issued by big companies and non-insistence of credentials for smaller works have been embodied in the revised conditions of contract.
Indian Railways’ massive pension bill of more than Rs 51,000 crore in the current financial year has been converted into a loan by the finance ministry.