Indian Railways is going in for massive cost-cutting measures to tide over its worst cash crisis in a decade. It has almost run through the Rs 951-crore cash surplus it had carried over from the previous financial year. The current railway revenue is way below current expenditure and as a result, it will have to renege on the dividend commitment to the Union government.
?We have already scraped the bottom of the barrel and fund balances have been almost fully utilised. There are no savings to meet the shortfall in internal generation targets,? an official connected with the exercise told FE. ?If the condition persists, Railways may even fail to pay dividend to the government,? he added.
The possibility of such an eventuality can be detected from the speed at which Railways is planning preventive measures. All zonal officers have been asked to stop spending more than their means. Railways expects total revenue to rise 9% in this fiscal to Rs 94,765 crore, while expenditure is expected to grow 3.44% to Rs 87,100 crore. But actual revenues are not keeping pace, while expenditure has mounted.
?Although Railways could not avoid payments under the Sixth Pay Commission?s recommendations, they have failed in ensuring effective control on expenditure other than establishment costs. Zonal railways have failed in observing austerity measures issued by the railway board,? the official said. Railways disbursed Rs 13,600 crore in 2008 on account of the Sixth Pay Commission recommendations.
An email sent to Railways financial commissioner Sowmya Raghavan did not elicit any response.
In 2009-10, Railways? gross traffic receipts fell short of the revised budget estimate of Rs 88,356 crore by almost Rs 2,000 crore. At the same time, total working expenses escalated. As per figures gathered by FE, the entity?s ordinary working expenses were higher by Rs 851 crore till the end of February against what was projected. For the entire year, the expenditure rose to Rs 84,200 crore against the estimated Rs 82,500 crore.
The Railways? cash surplus for 2009-10 is close to the lowest-ever cash surplus of Rs 763 crore that it recorded 10 years ago.
Railway Minister Mamata Banerjee?s predecessor Lalu Prasad had managed a cash surplus of Rs 39,412 crore in his five years in office, with an average of nearly Rs 8,000 crore. In fact, under Banrejee, Railways has done away with this accounts category recently.
Indian Railways appropriates cash surplus to development fund and capital fund. Due to the use of these funds in the development of railway facilities and a lower addition to the kitty, its total cash surplus depleted to Rs 14,000 crore at the end of March 2010 from Rs 17,400 crore in the previous fiscal.
Asking not to be named, a former member of the Railways Board said: ?There has been no increase in passenger fares in the last 10 years, while freight rates have been raised only marginally. There cannot be a free ride for everyone when the facilities are improving. The money has to come from somewhere. Fares have not been raised even in suburban trains. The same situation arose 15 years ago but that was tackled with a rise in fares and freight charges.?
The Railways is looking at increasing revenue flow by doing whatever is within their means — even selling scraps. At a conference in March, Banerjee issued a direction to this effect to all zonal general managers. To avoid further burden on the remaining reserves, Railways is also seeking private investments in almost all areas?developing stations, public utilities, running special freight trains, laying rail lines etc.
Plans are also afoot to recover the outstanding amount from zonal railways. The total outstanding amount is to the tune of Rs 1,500 crore, out of which Northern Railway owes the maximum. To this effect, general managers have been asked to prepare an action plan in consultation with financial advisors and chief administrative officers.