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Monday 20 January 2020

Goyal: Separate budget for social sector will save Railways

Following a damning report by the CAG, Piyush Goyal had to offer an explanation for the Indian Railways' earnings touching a 10-year low

According to the report of the Comptroller and Auditor General (CAG), the earnings of Indian Railways have reached a 10-year low. The operating ratio of the Railways has reached 98.44% in FY 2017-18, which means that the Railways have to spend Rs 98.44 to earn every Rs 100. Railways Minister Piyush Goyal has attributed this to the increased expenditure on salary and pension and the burden of social obligations due to the Seventh Pay Commission.

The Minister for Railways said in a written reply in the Lok Sabha on Wednesday that since the seventh pay commission came into force, Railways is spending more than Rs 22,000 crore on salaries and pensions of employees, which has affected financial health. Goyal also said that under construction of new lines and social obligations, a large part of its fund is spent in running trains even in non-profit areas.

Goyal explains impact of such expenditure on Railways

In the Question Hour, the minister said, “After the implementation of the recommendations of the 7th Pay Commission, additional expenditure of Rs 22,000 crore is being incurred on the salary and pension of railway employees. It contributes to the operating loss.”

Goyal said that the Railways was also spending a lot on cleanliness, suburban trains and gauge changes. He said, “All these have costs and this has an impact on the Railways.”


Goyal said, “When we look at the entire picture, implementing the recommendations of the 7th Pay Commission and running trains under social responsibility, the operating ratio goes down by 15% in a year.”

The minister said, “The time has come for us to explore the possibility of separating the budget for social sectors and spending on social obligations.”

CAG report

The present condition of the Railways can be understood from the operating ratio data. It simply means that the Railways is not earning even 2% on all its resources. According to the CAG report, the main reason for Indian Railways’ operating ratio to be 98.44% in FY 2017-18 is 10.29% of higher growth rate as compared to 7.63% operating expenses in the previous year.

CAG says that the Railways’ operating ratio was 90.48% in the financial year 2008-09, which was 95.28% in 2009-10, 94.59% in 2010-11, 94.85% in 2011-12, 90.19% in 2012-13, 93.6% in 2013-14, 91.25% in 2014-15, 90.49% in 2015-16, 96.5% in 2016-17 and 98.44% in 2017-18.

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