Tuesday, August 9, 2011

CAG: Railways must review fares if returns are to cover costs
New Delhi, Aug. 5: 
The Indian Railways “need to review the passenger fare structure to ensure that the pricing does not result in a below-the-cost return. Inflation indexing may be factored in to make the costing realistic,” the Comptroller and Auditor General of India (CAG) has said.
In a report on Railways Finances, placed in Parliament on Friday, the CAG said that as is unlikely that major cost-cutting could be resorted to in the medium-term, the IR needs to consider rationalisation of freight and passenger tariff through some form of pre-determined non-discretionary inflation-indexing.
Despite tall claims by two Railway Ministers, Ms Mamata Banerjee and Mr Lalu Prasad, that the Indian Railways (IR) seldom had it so good as during their tenures in terms of financial performance, the CAG highlighted how over the period 2008-10 there was “a cent per cent erosion” in net surplus available to the system from Rs 13,431 crore at the end of 2007-08.
The CAG pointed out that the Railways could generate only Rs 75 crore by way of net surplus for appropriation to Development Reserve Fund in 2009-10, after discharging all liabilities including payment of dividend. This was against Rs 1,391 crore and Rs 3,066 crore appropriated to the respective Funds in 2008-09.
Stating that the balances in the Reserve Fund at the close of 2009-10 declined by 68 per cent or Rs 10,623 crore over the previous year, it said the IRailways transferred, while closing the accounts of 2009-10, Rs 725 crore from Capital Fund to Development Fund to wipe out the negative balance under it. Depreciation Reserve Fund, Development Fund and Pension Fund were closed in 2009-10 with ‘negligible balances' of Rs 4.98 crore, Rs 5.41 crore and Rs 1.24 crore respectively, it said adding that “this will adversely affect future expansion of IR's existing services and consequently its market share in transport sector.”
Tracing the roots of the financial disarray of the Railways, the CAG said during 2008-10, gross traffic receipts (GTR) on an average increased annually by 10 per cent against average annual increase of 24 per cent in total working expenses during the same period. As committed expenditure in 2009-10 accounted for 70 per cent of the total revenue expenditure, due to the impact of the Sixth Pay Commission recommendations, this put “a strain on the finances and IR and forced it to curtail the growth in working expenses”. It said the sequel to keeping working expenses within the available resources in 2009-10 saw a hefty cut in the appropriation to DRF in that year, which “will have an adverse fallout on Railways' renewal programme of capital assets and ultimately affect its earning capacity and safety performance”, the CAG said.
Capital works
CAG also urged Railways to review all the capital works in progress and take expeditious decisions on closure of projects where there are road connectivity, particularly un-remunerative lines, where the progress over the years has been negligible and the need for going ahead with the project is no longer tenable. It also asked the Railways to beef up its monitoring of expenditure machinery to contain it within the authorisation approved by Parliament, since the Railways incurred Rs 1,907.17 crore more than the authorisation accorded by Parliament in eight revenue grants, despite obtaining supplementary provisions in seven of these grants.
The CAG also recommended Railways to go in for standards based financial reporting for improved accountability to ensure transparency in reporting and proper presentation of financial statements. Alongside, IR needs to strengthen its system of controls to watch realisation of its due share of revenues and other charges from public sector undertakings, as IR was not receiving its due share of revenues and operational costs from its own PSUs such as Indian Railway Financial Corporation.

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