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
