Indian Railways ‘window-dressed’ finances to present Operating Ratio in better light in 2018-19: CAG Report

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September 25, 2020 3:35 PM

The Comptroller and Auditor General (CAG) in its report stated that against the Operating Ratio (OR) target of 92.8% in the Budget Estimates, the OR of the national transporter was 97.29% in 2018-19.

The term Operating Ratio refers to the ratio of working expenses to traffic earnings, therefore, the lower the Operating Ratio is, the better it is.

To present its Operating Ratio in a better light in the year 2018-19, Indian Railways resorted to “window dressing” of its finances, IE reported citing a CAG report. The term Operating Ratio refers to the ratio of working expenses to traffic earnings, therefore, the lower the Operating Ratio is, the better it is. The Comptroller and Auditor General (CAG) in its report stated that against the Operating Ratio (OR) target of 92.8% in the Budget Estimates, the OR of the national transporter was 97.29% in 2018-19. This meant that Rs 97.29 was spent by Indian Railways to earn Rs 100. IE quoted the CAG the report as saying that one of the reasons that a better OR was shown than it actually was is because of the advance freight earnings of more than Rs 8,000 crore taken in the year to carry the freight the following fiscal year.

However, as per the report, the OR would have been 101.77% instead of 97.29% if advance freight of Rs 8,351 crore from CONCOR and NTPC was not included in the earnings of the financial year 2018-19. The Net Surplus in the financial year 2018-19 was Rs 3,773.86 crore. According to the report, the national transporter would have ended with Rs 7,334.85 crore of negative balance but for receipt of advance freight as well as less appropriation to Depreciation Reserve Fund and Pension Fund. It further stated that to present the working expenses and OR in a better light, the Railway Ministry resorted to “window dressing”.

Also, the CAG report cast doubts over Indian Railways’ use of its Extra Budgetary Resources for project financing, which started from the year 2015-16. While Rs 1.50 lakh crore of financial assistance was agreed by LIC over five years period (2015-20), the CAG noted that due to regulatory constraints, the financing arrangement with LIC materialized partially. During the year 2015-19, only an amount of Rs 16,200 crore could be raised from LIC. The shortfall of Rs 49,164 crore was recouped by the Railway Ministry by raising funds through short/medium term market borrowings which carry a higher interest rate.

The CAG report also stated that the progress in projects remained slow that were to be completed during the period 2015-20, due to inefficiency of the Indian Railways’ zones as well as weak monitoring at the Railway Board level. According to the report, records’ scrutiny relating to as many as 395 projects funded from EBR revealed that a total of 268 projects were still in progress as on 31 March 2019. Due to this, Rs 48,536 crore EBR funds were blocked other than defeating the intended objective of revenue generation for debt servicing. Review of identification as well as project sanctions for EBR funding revealed that projects that were financially unviable were sanctioned, the CAG report added.

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