Tuesday, December 6, 2011

Rlys stares at deferred dividend

Mamuni Das    New Delhi, Dec. 5: 
The Railways could be forced to defer their dividend payment of Rs 6,734 crore to the Government in the current fiscal – if it wants to spare money for spending on asset renewal, capacity augmentation and replacement of rail infrastructure.
With the growth in earnings not showing any signs of matching the growth rate of expenditure, Railway officials are jittery.

For instance, according to unaudited figures for fiscal 2011, the total traffic earnings went up by 50 per cent, compared to what they were in 2007. But, the operating working expenses – which reflect working staff, fuel, and rolling stock costs – have gone up by 82 per cent during the same period.
The actual data for fiscal 2011 are not yet compiled and the audit process is on.
Indian Railways' predicament is that it has to control expenses, while salaries, pension and fuel costs have proved almost impossible to control.
“After the Sixth Pay Commission implementation, these costs account for over 80 per cent of our total working expenses,” said an official.
The fear of many Railway officials is that wage and salary costs are unlikely to plateau in the near term. This is because the salaries have a dearness allowance component — which is linked to inflation. “Along with dearness allowance — which is now touching 58 per cent of basic pay – the allowances also go up,” said an official.
Moreover, the Railways — with 14 lakh employees — has been on an employment drive. Indian Railways also bears the pension payouts of 12 lakh pensioners from its earnings.


The appropriation to pension fund has registered an 18 per cent compounded growth during the last five years. The ordinary work expenses – which include staff and fuel costs – have been registering a compounded annual growth of over 15 per cent since 2007-08.
The situation looks scary in the backdrop of earnings growth not catching up with that of the expenses. Railways registered a 10 per cent growth in earnings, for the seven month period ending October against the same period last fiscal.
The economic slowdown is already getting reflected in the freight earnings – which account for two third of Railways revenues – with freight loadings showing a drop year-on-year in September and October.
The Fund balances – Development and Capital Fund – have become negative during last fiscal, with Finance Ministry turning down the request of Railway Ministry to give a bridge loan to fill the gap of Rs 2,101 crore.
The mismatch between earnings and expenses has taken a toll on the capacity enhancement works with zonal managers being asked to curtailing contractor payments. “There are even small payouts of a few lakhs that are pending,” an official from a zonal Railway said.


But, more importantly, Railway officials are upset about a trend that has set in during the last two years, where even the dwindling funds are being routed to those works that are unlikely to be remunerative.
Every year, the Railway officials have to prioritise specific areas where fund balances will be spent. There is a huge list of projects – that have accumulated over years and form a part of the Budget document.
Depending on the financial health, they prioritise where the funds will be spent –in remunerative projects with higher returns or those with social need.
“More funds have been routed to connect far-flung areas with social objectives. These are lines where the actual financial returns on investment are zero and sometimes negative. Moreover, these are lines where Railways will register losses to even keep them running operationally,” explained many officials Business Line spoke to.
“Now, depreciation reserve fund is dwindling; development fund is negative and capital fund is in negative,” summed up an official.


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