The Finance Ministry could consider bearing part of pension liabilities of the Railways to provide some relief at least till 2034-35, said the Parliamentary Standing Committee on Railways in its demand for grants, pointing out that “Railways is the only government department that meets its pension outgo from revenues”.

This (fiscal 2035) is a year after which the new pension scheme or NPS – a defined contribution scheme – will start showing some results by lowering the pension outgo. Right now, the pensions are paid under older pension scheme – a defined benefit scheme.

The recommendation is a shot in the arm for Railways, which has had to take a Covid-19 related resource gap loan of almost ₹79,398 crore.

According to the report, the Parliamentary Committee desire that the feasibility of bearing at least a part of the Railways pensionary liabilities by the Ministry of Finance, consequent upon the merger of the Railway Budget with the general Budget, be explored so as to provide some relief to the Railways at least till 2034-35.

Increasingly difficult

“The Committee note that appropriations to the Pension Fund account was nearly a quarter of the total working expense of the Railways. In just a span of one year, the appropriations to the Pension Fund rose 10 per cent from ₹48,350 crore at revised estimates (RE) 2019-20 to ₹53,160 crore at budgetary estimates stage (BE 2020-21),” the report said.

Railway Ministry submitted that it is increasingly becoming difficult to bear the pension expenditure from its revenues more so when the Social Service Obligations have crossed ₹50,000 crore in 2018-19. “The Ministry’s constraints in this regard merits due attention,” said the report.

The Committee had also asked Railways about lesser utilisation of capital expenditure in fiscal 2018, 2019 and 2020. On this, Railways said that this was mainly due to lesser expenditure under internal resource and Extra Budgetary Resources (EBR) segments of capex.

“While the shortfall under internal resource segment was on account of lesser internal resource generation resulting from sharp rise in staff cost and pension pursuant to the Seventh Pay Commission implementation and less-than-expected traffic earnings, lesser expenditure under EBR was due to reduction in requirement under Market borrowing projected by the Zonal Railways and lesser investment in partnerships projects. However, all efforts would be made to achieve the capex target of BE 2020-21,” stated Railways as per the report.

On the losses incurred by the Railways in passenger services purportedly due to the social service obligations which include pricing tickets at fares lower than costs, the committee said that Railways should rationalise “both freight and passenger fares” prudently.

“Since the demand for transport is elastic in a competitive market, the Committee would like the Railways to be mindful of the fact that any increase in fares should be confined to a certain limit depending upon the competition from other transport modes,” it added.

Profits earned from freight business of railways is utilised to compensate for the loss on passenger and other coaching services, in turn adversely affecting both freight and passenger business.