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Monday, June 25, 2018

Railways under-reported expenses to make pension bill look smaller: CAG

Operating Ratio is the indicator of the amount of money spent to earn every Rs 100; the lower the better. A 100 per cent Operating Ratio denotes zero financial viability in business and signals an organisation in distress.

Written by Avishek G Dastidar | New Delhi | Updated: March 14, 2018 2:51:05 am
Indian Railways, Railways, irctc.in, pension bill, railway pension bill, piyush goyal, indian express The CAG report says the Operating Ratio during 2016-17 had deteriorated to an all-time low since 2000-01 when it was 98.34 per cent.

Railways window-dressed its books and under-reported its pension liability to make its Operating Ratio look better than it actually was last fiscal, a government audit has found.

In the financial year 2016-17, Indian Railways in its books of accounts made its pension bill look smaller than it actually was to under-report its expenses by Rs 5,025 crore, the audit revealed and noted that if actual expenses were factored in, the operating ratio would have crossed 99 per cent as opposed to 96.5 per cent shown in the books, the Comptroller and Auditor General has found in its latest report tabled in Parliament Tuesday.

“Thus Operating Ratio of 96.50 per cent does not reflect the true financial performance of the Railways,” the report says and adds that actually the figure should have been just shy of 100 per cent.

Operating Ratio is the indicator of the amount of money spent to earn every Rs 100; the lower the better. A 100 per cent Operating Ratio denotes zero financial viability in business and signals an organisation in distress.

The Indian Express had on April 19, 2017 reported that Railways had ended the fiscal with its worst Operating Ratio since 2000.

The CAG report says the Operating Ratio during 2016-17 had deteriorated to an all-time low since 2000-01 when it was 98.34 per cent. Had the actual amount Rs 40,025.95 crore required to meet the expenditure on pension payments appropriated to the Pension Fund—Railways books had shown the figure as  Rs 35,000 crore—the total gross working expenditure of Railways would have increased Rs 5,025.95 crore and the Operating Ratio would work out to 99.54 per cent.

Throughout the audit report the CAG has found red flags regarding transparency of the railway books. It has found details of value of assets created either absent or not decipherable.

The CAG auditors did not find details of assets created or acquired with money borrowed from external sources, like Extra Budgetary Resources (Institutional Finance) in the balance sheets and Block Accounts (a type of books maintained by Railways for this).

“Audit observed that no disclosure for the assets (rolling stocks) acquired through funding from Indian Railway Finance Corporation and projects executed under Extra Budgetary Resources (Institutional Finance) were made in the Block Accounts and Balance Sheets. Assets Registers, Land and Building Registers etc. were either not maintained in the zonal railways and production units or maintained but not updated to reflect the true value of assets created,” it said.

Taking stock of the core business of running trains, the CAG has found that the system of subsiding passenger business through the freight earnings continues and in 2016-17, around 85 per cent of the profits from freight business was hived off to run the loss-making passenger segment.

Commenting advsersely on the way railways sets its fares, the CAG has said that the same should be set to recover cost in a phased manner and keeping in mind rationality, flexibity and current market scenario. “There is hardly any justification for not fully recovering the cost of passenger services in case of AC 1stClass, First Class and AC 2-Tier. However, since one of the factors for nonrecovering full cost from these classes could be issue of free and concessional fare passes/ tickets to various beneficiaries in good numbers, this practice needs to be scaled down,” it said.

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