The government auditor has pointed out that Indian Railways has been dipping into its budgetary support to repay the principal component of lease rentals to its fund raising arm, Indian Railway Finance Corporation (IRFC).
In its report tabled in the Lok Sabha on Friday, the Comptroller & Auditor General said that between 2011 and 2014, the Indian Railways was able to maintain a positive balance in its funds by doing so.
This arrangement made borrowings from IRFC more expensive as the Railways has to pay a dividend in perpetuity on funds taken from budgetary support.
The CAG has pointed out that “a positive balance in the ‘Railway Funds’ was due to not making the payment of ₹ 12,629.49 crore to IRFC (towards principal component of lease charges) during 2011-14 from Capital Fund. The payment to IRFC was made from the Capital advanced by the government as General Budgetary support on which five per cent dividend is payable to the government.”
The CAG has also attracted attention towards the lack of funds for replacing over-aged assets. The Ministry of Railways had spent ₹7,119.91 crore on replacement of the assets against throw forward value of ₹47,310.94 crore from depreciation reserve fund (DRF) during 2013-14. Thus, there is huge backlog of renewal and replacement of over-aged assets in railway system which needs to be replaced timely for safe running of trains.
Non-availability of sufficient funds in Depreciation Reserve Fund to replace the over-aged assets and, in Capital Fund to meet its liability of payment towards principal component of lease charges to IRFC is indicative of poor financial health of Indian Railways, CAG concluded pointing the need to increase funds balances.