Railways puts freeze on new projects this year to rationalise costs
In a bid to rationalise its expenses in the wake of the economic slowdown caused by the Covid-19 pandemic, Indian Railways plans to put on hold infrastructure projects sanctioned in the current financial year other than those related to safety work, according to a Railway Board order.
The railway ministry has clarified that the order, which has been reviewed by HT, will not affect any ongoing vital infrastructure projects of the railways.
In a communication sent to all zones and public sector undertakings (PSU) on Tuesday, the board said projects that were previously approved but have made insignificant progress “shall be kept frozen till further orders except those which are essentially required for safe running of trains”.
The national carrier has estimated a financial loss of around Rs 40,000 crore in its passenger segment due to suspension of regular passenger trains since March 22.
“In pursuance of Ministry of Finance’s Office Memorandum No.42(02)/PFC-1/2014 dated 04.06.2020 on the subject and in view of the circumstances prevailing in the current financial year, following decisions have been taken by Board: New works/ Umbrella works included in Pink Book 2020-21 shall be kept in abeyance. However, those works which impact the safe running of trains and are considered essential and inescapable may be considered for sanction,” the board’s order said.
Unutilized projects identified as ‘umbrella works’ of 2018-19 and 2019-20, if any, may be suspended, the order added. Umbrella works refer to projects that have been sanctioned combining similar work at different locations.
The board has instructed zonal railways to review all projects already approved by them.
“Exemption for sanction of works which are considered essential and inescapable will be obtained from the ministry of finance,” the order added.
The order issued by the railway board refers to a directive issued by the finance ministry in June on government spending in the year.
“It may be appreciated that in the wake of the Covid-19 pandemic, there is an unprecedented demand on public financial resources, and a need to use resources prudently in accordance with emerging and changing priorities. However, many new proposals for in-principle approval are being received from ministries/departments,” the directive said.
“No new proposal for a scheme/ sub-scheme, whether under delegated powers to Administrative Ministry including Standing Finance Committee proposals or through Expenditure Finance Committee should be initiated this year (FY 2020-21)except the proposals announced under the Pradhan Mantri Gareeb Kalyan Package, Atma Nirbhar Bharat Abhiyan package and any other special package announcement,” it said, adding that in-principle approval for such schemes will not be given in this financial year.
The initiation of new schemes already approved in FY 2020-21 will remain suspended for one year till 31 March 2021 or till further orders, it added.
“This means all new and existing works across railway units are basically halted as they don’t come under safety of train operations and are neither essential nor inescapable,” a railway official explained.
When contacted by HT, a spokesperson for the railways ministry said it has to abide by the instructions of the finance ministry, adding sufficient resources exist and have been provisioned for to ensure that wheels of progress and modernisation continue to move at rapid speed.
“The order is not going to impact any of any vital infrastructure projects of Railways. It is not going to impact our mission of 100% electrification of routes, doubling tracks , any of railway high speed corridors or DFCCIL, vital signalling projects , projects to launch new modern trains / locomotives, passenger amenities or any project to enhance safety. It may be noted that there is no capital expenditure reduction for infra works and full capex will be utilised,” he said.
Railways, earlier this month, sent detailed orders announcing several cost-cutting measures. The Railway Board had all zones to review contracts and manpower requirements to curtail expenditure.
“It is understandable. As it is, Indian railways had one of the most alarming operating ratios. So with Covid happening, they ended up incurring massive losses. Also, they incurred losses while transporting people to their home states during lockdown. However, Rs 40,000 crore loss is very large by any standard. So it is prudent to start cutting on expenditure that can be reduced,” said Jaijit Bhattacharya, president of the Centre for Digital Economy Policy Research (CDEP), a think tank.
Railway Board chairman VK Yadav on Tuesday said the railway ministry aims to make up for the losses in the passenger segment through freight revenue. Freight traffic on July 27 was marginally more than that on the same day last year “in spite of Covid-19 related challenges,” he said.