CAG said the railways resorted to “window dressing” to put its working expenses and operating ratio in a “better light.”
A railway official said such a characterisation was unwarranted as this has been standard accounting practice.
“Since its introduction in FY18, as per the Indian Railways’ advance freight policy, such advance freight was included in FY18 also, so I do not understand why the term was used,” the official told ET, explaining why the Railway Board had written to the CAG.
‘Operating Ratio Hit by Pension Bills’
The policy allows large freight customers to get tariffs fixed for a year by making payment in advance to the Indian Railways.
“It is submitted that Railways have formulated an advance freight policy which is beneficial to both the Railways and the stakeholders,” the Railway Board said in its letter, details of which have been accessed by ET. “It may be appreciated that if the advance has benefitted Railways to improve operating ratio (OR) in 2018-19, the adjustment of the same has adversely impacted Railways receipts and OR in 2019-20.”
Senior rail ministry officials said that the CAG’s comment was not justified, given the railways’ social service obligations apart from its large salary and pension bill. State-owned Indian Railways is one of the country’s largest employers, serving the world’s second-largest population and covering the seventh-biggest country by area. Passenger fares are subsidised, partly by freight.
The official said efficiency had started improving in the past few years, but implementation of the Seventh Pay Commission’s awards led to a steep rise in salaries and pensions. “The Indian Railways’ operating ratio would have been less than 75% had the pension bills not been included as operating expenses,” a second official said.
Operating ratio is the amount of money the national transporter spends to earn each rupee. The lower the ratio, the healthier its finances. “While we respect the extraordinary contribution of the retired railway employees, the system of putting pension as part of operating expenses is resulting in most misleading figures and state of railway efficiency,” the official added.
The Indian Railways’ staff and pension bill was 80,791 crore in FY15, when the operating ratio was 91.3%. This rose to 1.24 lakh crore in FY 19 at an operating ratio of 97.3%.
“We should have had controllable expenses, but we are having to dole out heavy sums as pension and are not even allowed to increase passenger fares. How is this a just representation of our financial position then?” said the first official cited above.