Railways may have to dig into pension, depreciation and other funds to bridge the gap between revenue and expenditure in 2011-12. If the figures till October are any indication, railways would face a situation where its revenue would be lower than the non-Plan expenditure for the first time in at least four years, despite efforts to cut costs and raise income.
The transporter would either have to withdraw money from reserves that it maintains for payment of pension and replacement of old assets or increase fares to make up for this gap. But given the political situation and lack of consensus within the railway ministry, a hike in fares seems unlikely.
?In the absence of a fare rise, railways would be left in want of options but to eat into its reserves like pension fund, depreciation fund and safety fund,? a senior official in the Indian Railways said. Sources said among the reserves maintained by railways, pension and depreciation reserve funds are most vulnerable.
Data obtained from the railway board shows that the transporter had a gap of R2,500 crore between earnings and non-Plan expenditure till October even after controlling expenditure on contractual works and imposing surcharges on freight.
It earned R56,153.86 crore during the period and spent R58,717.82 crore on items, including fuel, small works in zonal railways, that come in non-Plan head of expenditure. In addition, it spent R25,513.09 crore under Plan head. Railways has released earnings figures till November, but separate comparable numbers for Plan and non-Plan expenditure for this period could not be accessed.
While total spending till October is way higher than the earnings, it is the non-Plan expenditure that is crucial in deciding the financial health of the Indian Railways because non-Plan spending is made out of its own income. Plan expenditures are financed out of the money received from the finance ministry and more funds can be demanded to meet such requirement.
Sector observers say the railways has a small chance of preventing withdrawal from the reserves if it meets earnings target of R1.09 lakh crore at the end of the current financial year. ?The gap between income and non-Plan expenditure is likely to increase if earnings don?t rise at the targeted rate,? Vijayalakshmi Viswanathan, former financial commissioner of the Indian Railways, said.
Data till November and the railway board?s own admission show there are hurdles in attaining the target. Last month, railway board chairman Vinay Mittal had said, ?Freight loading target of 993 million is very challenging to achieve because of lower loading of coal and iron ore?. The earning till November was 2.26% lower than than the target.
The national carrier has been witnessing a financial downturn since Trinamool Congress chief Mamata Banerjee took charge as railway minister in 2009. This led to successive reduction in contribution to various funds that it maintains for payment of pension, capital investment and replacement of old assets.
Combined balance in these funds as on March 31 was R3,102 crore only.