All set to change track to good health

Our Bureau New Delhi | Updated on March 04, 2011

Ms Mamata Banerjee, Minister of Railways, leaving Rail Bhawan to present the Railway Budget in the Parliament House, in the Capital on Friday. - Ramesh Sharma   -  Business Line


After suffering a huge hit from the sixth Pay Commission Award, the Indian Railways' finances are staging a gradual recovery of sorts.

In 2007-08 — easily its best year — the Railways managed to generate Rs 20,339 crore of cash from its operations on the back of an overall economic boom. That was also when its operating ratio — working expenses as a proportion of gross receipts — touched a 45-year-low of 75.9 per cent.

But the following year saw twin setbacks of economic slowdown (affecting freight as well as passenger revenues) and additional staff costs arising from the implementation of the Pay Commission report.

As a result, the Railways' internal cash generation plummeted to Rs 12,113 crore in 2008-09 and a mere Rs 1,307 crore in 2009-10, which also returned an operating ratio of 95.3 per cent. This was almost the 96-98.3 per cent levels of 2000-01 and 2001-02.

In her Budget speech, the Minister of Railways, Ms Mamata Banerjee, claimed that if the Railways' liabilities had been restricted to just payment of the new salary and pension scales and not discharging arrears for previous years, the operating ratio for 2009-10 would have been only 84 per cent. And if the salaries and pensions were also maintained at the pre-Pay Commission levels, the ratio would have been still lower at 74.1 per cent.

“The latest assessment of the Pay Commission's impact reveals an additional expenditure of Rs 73,000 crore during the 11th Plan period (2007-08 to 2011-12),” she said, adding, “I hope the Railways will soon emerge stronger, leaving behind the impact of the Pay Commission, and engage fully in the revival of its financial health.”

For the current fiscal, the Railways' internal cash generation is estimated at Rs 10,283 crore, and projected to further improve to Rs 12,482 crore in 2011-12. Moreover, the revised estimate of the operating ratio for 2010-11, at 92.1 per cent, is set to be below the budgeted 92.3 per cent. This is mainly because of the savings from a reduced dividend outgo.

The Railways was originally expected to fork out a dividend of Rs 6,608.46 crore for the current fiscal. But with the Parliamentary Railway Convention Committee recommending a reduction in the dividend rate from seven to six per cent (on the Railways' capital-at-charge), the outgo in the revised estimate is placed at Rs 4,917.36 crore and budgeted at Rs 6,734.72 crore for 2011-12.

Published on February 25, 2011

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