1. Budget 2016: After its 7th Pay Commission Rs 40,000 crore ‘request’ denied, Indian Railways wants FinMin to bear PSO bill

Budget 2016: After its 7th Pay Commission Rs 40,000 crore ‘request’ denied, Indian Railways wants FinMin to bear PSO bill

Budget 2016: After 7th Pay Commission Rs 40,000 crore request of Indian Railways was denied, Rail Ministry Rail Ministry wants cost of its Public Service Obligations in 2016-17 to be shared by the finance ministry - Indian Railways has demanded that Budget 2016...

By: | New Delhi | Updated: February 19, 2016 10:21 AM
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Budget 2016: Sources in the ministry of railways told FE that Indian Railways social obligation cost would be around Rs 34,000 crore this financial year, steeply higher than about Rs 25,000 crore in FY14. (Reuters)

Budget 2016: After 7th Pay Commission Rs 40,000 crore request of Indian Railways was denied, Rail Ministry Rail Ministry wants cost of its Public Service Obligations in 2016-17 to be shared by the finance ministry – Indian Railways has demanded that Budget 2016 bear the PSO cost. The PSO, sources said, includes a part of passenger subsidies but not all of it, as the Indian Railways is still to figure out what PSO is.

Even as experts call for an overhaul of the operations of the Indian Railways and its corporatisation, the transporter’s losses from the passenger segment and public service obligations are rising relentlessly and it is now looking for some relief from Budget 2016 (Union Budget 2016 presentation date is February 29).

Indian Railways gives as many as 53 types of concessions in passenger fares. Because of the various subsidises and concessions the transporter provides, Indian Railways had to bear an overall loss of Rs 32,000 core in FY14 for running passenger operations. All of passenger categories except AC three-tier are making losses for the Indian Railways.

Sources in the ministry of railways told FE that Indian Railways social obligation cost would be around Rs 34,000 crore this financial year, steeply higher than about Rs 25,000 crore in FY14. The figure is believed to have stood at over Rs 30,000 crore last financial year, although no official estimate is still out.

The Indian Railways carries out numerous transport activities which are uneconomical in nature but are considered to be in the larger interest of the society. The items which fall under PSOs and are making losses, include transport of essential commodities carried below cost, subsidies and concessions on passenger fares and other coaching services, operation of uneconomic branch lines and new lines opened for traffic during the last 15 years.

“There is no clarity on whether the Indian Railways is a commercial entity or a tool to meet social service obligations. As the transporter needs to invest a lot of money for the expansion and up keep of its infrastructure, there needs to be a proper framework to compensate the Indian Railways on the losses it makes on running passenger operations and the cost it incurs for meeting its public service obligations,” said Abhay Krishna Agarwal, Partner Infrastructure & PPP at EY LLP.

Sources said even the Standing Committee on Indian Railways has recommended the government to work out a procedure on the basis of which the public service obligation costs are reimbursed to the railways. Documents accessed by FE reveal that the finance ministry wants an independent body to evaluate and define what qualifies under ‘public service obligation’ for railways and also decide on the extent of relief which can be claimed from the government under it.

“Utilising your track for providing compensations and subsidises and running below cost operations is not a prudent way of running operations, who is stopping you from increasing passenger fares, political compulsions should not be factored into while deciding fares,” Raghvan Sivadasan, former railway board member said.

While the finance ministry wants an independent body to evaluate and decide on the quantum of burden to be shared, the ministry of railways has proposed an Inter-Ministerial Committee to be set-up for evaluating the impact and the framework of sharing the public service obligation cost borne by the railways. As an interim measure the transporter wants the general revenue to bear a certain percentage losses incurred by the Indian Railways in FY16.

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  1. M
    Manoj
    Feb 19, 2016 at 11:22 pm
    I agree. It is being run inefficiently. There is a broad level of corruption in railways. So cost optimisation and eradication of corruption can easily bring significant savings. Moreover technology can be used to automate the internal processes and make the organisation more efficient and cost effective. And finally it is free to charge market rates for penger services and freight charges. Subsidies should be given only to people below certain income level similar to what GoI is trying to do for LPG and PDS. Indian railways had been presenting its own budget , then why it is not exercising full autonomy in terms of managing its finances. It must be self sufficient and at the same time it should strive for becoming a world cl transporter with full safety and amenities for penger, clean stations and tracks.
    Reply
    1. A
      abhiram
      Feb 19, 2016 at 2:28 pm
      My view social obligation is concerned is beneed to rich people avail free pes because of their influence in politics need to be review or govt should separate funding not at the cost of public. Railway should cut all non productive expenditure meant for protocol service as a status symbol by authority and politicians ry structure must be performance based not as a liability to railway for this seek people must be voluntary retire not to be continued as liability. Railway must utilities it's existing resources than out sourcing working. Inventory control over procurement and use of material is essentially needed
      Reply
      1. S
        sivakumar
        Feb 19, 2016 at 7:42 am
        Indian Railways offer so many case studies for MBA regarding mismanagement. First, they should reduce the number of employees and switch over to latest technology. Secondly, there is no proper monitoring mechanism about ticketless travel, entry into the railway platforms without platform tickets, etc. The cost of laying lines is exhorbitant and it should be given to reputed firms. CVC it is believed receive a large number of complainants about malpractices in railways. What is Railways Own Vigilance is doing ? nobody knows. The railways should slowly be privatised. For instance, they can allow private players to use the Railway Lines to operate more trains and tthey would adhere to the guidelines of Raiways Regulatory Authority of India, which can be set up to on similar lines of TRAI.
        Reply

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