FACED WITH a deep financial crisis, Railways will commit to a massive cost-cutting mode in the upcoming Rail Budget, targeting to save 15 per cent in its overall expenditure with the mantra: “Money saved is money earned”.
A note went out from Railway Minister Suresh Prabhu’s office last month to all the seven Railway Board members, seeking a detailed plan of action for the reduction of what is called “Ordinary Working Expenses” in the next fiscal to be reflected in the budget. To put things in perspective, these expenses generally see a natural year-on-year increase by around 11-12 per cent, thanks to inflation and other factors.
Railways usually attempts to cut down that increase. Now, the idea is to not only arrest that increase, but to try and reverse it—something Railways is not used to.
Salaries, pension, fuel bills and other expenses take away a majority of Railways’ revenues, leaving next to nothing to invest back into the system. The exigency is felt because the 7th Pay Commission burden translates to an additional expenditure of Rs 32,000 crore next fiscal and Railways is not earning anywhere close to its target and is not likely to earn enough to foot that bill in the normal course, ministry sources said. An easy way out would be to hike fares but that, it is said, is being looked at as a difficult proposition with fuel costs falling and the graph of its passenger business hitting a plateau. Moreover, even a 10-15 per cent hike in fares will not get the desired additional money.
This comes close on the heels of the Railway Board instructing zonal railways to look for ways to reduce expenses by 5 per cent and figure out methods to increase earnings by another 5 per cent this year itself in addition to its revised estimates for the ongoing budget year.
“The traffic and earnings of Indian Railways have declined considerably and continues to do so,” says the instructions from the Board to its zones. “The requested handholding by the Ministry of Finance through Budgetary support for Capital and financial assistance to meet the 7th Pay Commission impact has not yet met our expectations. The situation therefore calls for determined expenditure management,” the Board has said.
Last financial year, Railways had budgeted around Rs 1,12,649 crore whereas it actually spent Rs 1,08,970 crore— a saving of Rs 3,679 crore, or just about 3 per cent.
A set of earlier instructions from the ministry had directed all zones to adopt massive austerity measures to try and save around Rs 5,000 crore.