Rising expenditure and the challenge of meeting growth in demand for services have compelled the Railways to go for a hike in fares and freight rates that took the country by surprise Friday.
In the interim budget in February, presented by the then Railway Minister Mallikarjun Kharge, the ministry had sneaked in the expected mop-up from this hike in the future earnings of this financial year. However, the House was not made aware of the fact that this mop-up from the future hike was being factored in.
The Railways has projected an upbeat figure of Rs 164,995 crore in revenues for this fiscal, which is around Rs 20,000 crore more than what was projected for the last fiscal. Half of that extra amount is to be obtained from the hike. Similarly, its projected surplus for this fiscal, around Rs 10,000 core, would not have been achieved without the hike.
Denying ministry the hike, therefore, was not an option.
At the heart of its bulging expenses are two components: fuel and staff costs, which take away as much as Rs 70 out of every Rs 100 the Railways earns. On top of that, its freight to passenger subsidy has crossed Rs 26,000 crore.
Its total working expenses will shoot up to highest-ever Rs 1,44,199 crore this fiscal — up from Rs 127,260 crore last fiscal. This is irrespective of whether it ends up earning as much as it hopes to earn. On top of that, it is now trying to earmark funds anticipating a huge outgo towards the proposed Seventh Pay Commission.
Without this hike, the operating ratio target of 89.8 per cent — money spent to earn every hundred rupees — could not have been achieved too. The figure now stands at 90.8 per cent, worse than last year’s 90.2. Notably, the projection for this year is worse than last year’s projection.
Railways’ pension bill alone is going to swell this year by about Rs 7,000 crore to touch at Rs 26,700 crore. This is expenditure Railways can hardly avoid.