Pointing out that the operating ratio of the Indian Railways did not reflect the true picture of its finances in financial year 2019-20, the Comptroller and Auditor General of India (CAG) said that the ministry needs to ensure that surplus and operating ratio represent the true picture of its financial performance. The references pertain to fiscal 2019-20 when current commerce minister Piyush Goyal was also the railways minister.
In a report tabled in the parliament on Tuesday, the CAG also made a slew of recommendations to the railway ministry to augment its revenue and earnings.
Operating ratio (OR) is the amount that the railway ministry spends to earn every ₹100. “Against the target of 95% in the budget estimates, the OR of railways was 98.36% in 2019-20. This meant that railways spent ₹98.36 to earn ₹100. As compared to the OR of 97.29 per cent during 2018-19, there was deterioration in 2019-20,” the CAG report pointed out. “Operating ratio of Indian Railways reached an all-time high of 98.44 per cent in 2017-18, which marginally came down to 97.29 per cent in 2018-19, and increased to 98.36 per cent in 2019-20."
Bringing to the fore the accounting tactic deployed by the ministry to window dress the number in FY20, the CAG report said, “Had the actual amount (₹48,626 crore) required to meet the expenditure on pension payments of zonal railways been appropriated to the pension fund (instead of ₹20,708 crore), the Railways working expenses would have increased.”
“With the increased working expenses, the ratio would have been 114.35% instead of 98.36% in 2019-20. In the union budget 2021-22 document, it has been mentioned that with required level for appropriation to pension fund from railways revenues in 2019-20, the ratio would be 114.19 per cent. Thus the ratio of 98.36 per cent shown by the railways does not reflect the true financial performance of the railways," it added.
Not accounting for the actual outgo on pension payments of zonal railways, also led to a net surplus of ₹1,589.62 crore in FY20 against ₹3,773.86 crore in FY19, according to the CAG report. “Railways would in fact, have ended up with a negative balance of ₹26,328.39 crore instead of surplus of ₹1,589.62 crore, had the actual amount required to meet the expenditure on pension payments of zonal railways been appropriated to the pension fund,” the CAG said in its report.
Ahead of the budget, the CAG has made a slew of recommendations to the ministry of railways. For the purpose of revenue augmentation, CAG has suggested the railways to diversify its freight mix and reduce dependency on coal. The CAG also wants the railways ministry to revisit the passenger and other coaching tariffs so as to recover the cost of operations in a phased manner and reduce its losses in its core activities.