Prabhu asks FM to handhold Railways through Pay Commission burden

In a letter to Finance Minister Arun Jaitley, Railway Minister Suresh Prabhu cited the prevailing financial position of railways, efforts at cost cutting and possible gradual adjustment of fares and other non-tariff revenue measures to absorb the impact while requesting the exchequer’s help for implementation of the Commission recommendations. “I would therefore earnestly request you to help the Ministry of Railways and handhold it for the implementation of 7th CPC recommendations,” the Railway Minister said in the letter. 

“This may be done either through compensation of loss for coaching services (Rs 31,727 crore in 2013-14) or directly by virtue of a revenue grant, matching the amount of the 7th CPC’s liability placed upon railways for the next 3-4 years,” he said. Prabhu hoped that during this 3-4 years period, railways would be able to absorb the impact from their resources through gradual adjustment of fares and other non-tariff revenue measures. 

However, Railway Minister has expressed his reservation about increasing the freight rate in the given scenario contending that it would have a “deleterious impact” on national economy. He said, “In order to maintain these expenses at the current proportion — at 51.5% of the gross receipts, the railway revenues will need to grow substantially by 40% in 2016-17 which is well nigh impossible given the fact that till October 2015 growth was only 8.4 %.” 

According to the Pay Commission report, the annual financial impact on Railways will be approximately Rs 28,450 crore in addition to the normal growth which will require to be built into the Railway Budget 2016-17. “Our initial assessment however is that this additional impact would be around Rs 30,031 cr over and above the normal assessed growth of Rs 10,816 cr,” stated Prabhu, who has sent a detailed note regarding the impact. 

“While we have put in place serious cost cutting measures and are focusing on fuel management and lowering of staff intake, more than 2.3rd of the railway expenditure is inelastic - staff cost, pension, lease charges, maintenance of fixed assets,” added the minister.