Railways lost Rs 29,000 crore due to leaks in dual freight system: CAG

TNN | May 9, 2015, 

The CAG has found that iron ore carried at concessional domestic rates but not consumed for domestic purposes and diverted for third party trading or exports resulted in huge losses to the exchequer.

NEW DELHI: Railways suffered a huge loss of over Rs 29,000 crore in freight earnings due to mismanagement of dual freight policy for transportation of iron ore, according to a report of the Comptroller and Auditor General of India.

The CAG has found that iron ore carried at concessional domestic rates but not consumed for domestic purposes and diverted for third party trading or exports resulted in huge losses to the exchequer.

"The deficiencies in compliance with laid down rules and procedures in booking and delivery of iron ore at domestic rates by railway officials concerned resulted in a financial loss of expected goods earnings to the extent of Rs 29,236.77 crore during May 2008 and September 2013," the federal auditor in its report tabled in Parliament on Friday.

It said the railways failed to do the needful and allowed the manufacturers to transport iron ore at concessional rates.

The national auditor reviewed the records connected with 83 major loading points over seven zonal railways and 180 major unloading points over 15 zonal railways.

Railways had introduced the dual freight policy (DFP) from May 22, 2008 as per which transportation of iron ore was categorised in two parts - domestic consumption and other than domestic consumption. "There were inherited deficiencies in the framework of the DFP for iron ore," the report said.

The DFP in effect led to freight differences between domestic and export categories, which was on an average more than three times.

The auditor observed that the railways did not lay down adequate internal controls or check and balances for effective implementation of DFP.

In another report, the CAG noted that the railways had not been able to meet its operational cost of passenger services, incurring a loss of nearly Rs 11,000 crore between 2008-09 to 2012-13.

The CAG found that the transporter incurred losses in all category of passenger classes barring AC 3-tier.

The loss incurred on operational cost of passenger services increased from Rs 15,268.41 crore in 2008-09 to Rs 26,025.46 cr in 2012-13, it said.

The auditor observed that during 2012-13, there was a loss of Rs 26,025.46 crore on passenger and other coaching services. The freight services earned a profit of Rs 33,221.24 crore which was utilised to compensate the loss of Rs 26,025.46 crore on operation of passenger services.

All classes including AC-1, AC-2, AC Chair Car, Sleeper, Second Class, Ordinary and EMU surburban services incurred losses during 2012-13 barring AC-3.

Railways also witnessed decline in operating ratio (percentage of working expenses to traffic earnings). It deteriorated to 93.60% in 2013-14 from 90.19% in 2012-13.

Net Surplus after meeting dividend liability decreased to Rs 3,740.40 crore in 2013-14 as compared to Rs 8,266.25 crore in 2012-13. It was less than the budget estimates by 71.55 per cent.

The railways maintain Depreciation Reserve Fund (DRF) for replacement and renewal of existing assets.

The CAG has found a huge backlog of over aged assets amounting to Rs 47,310.94 crore as on April 1, 2013, out of which railways had spent Rs 7,119.91 crore in 2013-14 on replacement/renewal.