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

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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