Report of the Comptroller and Auditor General CAG on the Finances of Indian Railways (IR)

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Report of the Comptroller and Auditor General CAG on the Finances of Indian Railways (IR)

Key findings of the CAG report:

Decline in receipts: The total receipts decreased by 8.30% in the year 2019-20 as compared to the growth of 6.47% in the year 2018-19.

Cross-subsidy: Dividend from freight traffic was used to cover losses (on the operation of passenger and other coach based services).

Operating Ratio: This ratio fell from 97.29% in the year 2018-19 to 98.36% in the year 2019-20.

Operating Ratio is the ratio of operating expenses (expenditure incurred in day-to-day operation of railways) to revenue earned from traffic.

Its high ratio indicates a low level of capacity to create surplus. This surplus can be used for capital investment.

Key recommendations:

  • Diversifying the freight basket to generate income and tapping idle assets to generate additional income.
  • Measures should be taken to increase internal revenue, so as to reduce dependence on Gross Budgetary Support (GBS) and Extra Budgetary Resources (EBR).
  • There should be a review of the working of loss making public sector undertakings. Also, the process of winding up of non-working PSUs of Railways should be expedited.
  • To review passenger and other coach based charges so as to achieve the cost of operation in a phased manner and minimize losses in its core activities.

Sources of funding of Indian Railways:

  • Its own internal resources (freight and passenger revenue, leasing of railway land, etc.) gross budgetary support from the central government.
  • Extra-budgetary resources: mainly debt, but also include institutional financing, public private partnerships, and foreign direct investment.

Source – The Hindu

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