Railways’ turnaround derails

Faced with the biggest financial crisis of the decade, the Indian Railways have decided to ask to the finance ministry to fund the additional burden of Rs 55, 000 crore that it has been required to shell out over the last three years.

Faced with the biggest financial crisis of the decade, the Indian Railways have decided to ask to the finance ministry to fund the additional burden of Rs 55, 000 crore that it has been required to shell out over the last three years.

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Railways finances are in a mess, with the growth rate in earnings plummeting from 11.4% in 2008-09 to 9.1% in 2009-10 — placed at 7.8% until the end of December 2010.

On the other hand, working expenses have grown: 35.5% in 2008-09, by 21.1% in 2009-10 — placed at 1.7% until the end of December last year.

The result of all this is that the Operating Ratio (the sum of money spent to earn a sum of R100) has galloped to 95 %—the highest since 2001-02.

When she presents the budget next month, Railways Minister Mamata Banerjee may be unable to appropriate money for the purchase of new assets and improvements in passenger amenities through the capital fund and the development fund. This is the dilemma engaging top officials in the Railways involved in the budget preparation exercise.

Top ministry sources believe, like it is done in other ministries, the finance ministry should evolve a mechanism to take care of the huge impact that hits the Railways after every pay commission. The ministry will shortly be sending out a proposal on this issue.

Banerjee has not been fortunate about the timing of

her stewardship of the railways ministry. Over a three year period beginning 2008-09, the Railways has had to bear an additional burden of R55, 000 crore towards fulfilling commitments of the sixth pay commission.

This year, the Railways also need to shell out an additional R1, 500 crore to its employees under the modified assured career progression scheme.

“Although these factors (see box) are beyond the control of the railways, suitable steps are being taken to improve earnings and control expenditure,” Chairman, Railway Board Vivek Sahai said.