Prabhu ropes in D K Mittal to head panel on Railway financial health

BCG, McKinsey to be part of the group

To chalk out a clear vision for the Indian Railways and align Budget announcements with it, Railway Minister Suresh Prabhu has formed a committee under D K Mittal, former secretary, financial services. The committee, which would suggest ways of improving railway finances, has a tight deadline of December 21 to summit its report.

A senior railway ministry official said Prabhu wanted certain concrete measures to be presented to Parliament in the Railway Budget for 2015-16 in February. The nine-member committee would have representation from the finance ministry. Financial secretary, Railway Board, chairmen and managing directors of railway public-sector units — RITES, Ircon and Concor — besides the managing director of Railway Land Development Authority would be part of the committee.

Two members from Boston Consulting Group (BCG) and Mckinsey India would also be members on the panel. The terms of reference include studying the efficacy and sufficiency of the existing revenue structure and avenues for raising revenues besides identifying leakages of revenue.

This is the second committee formed by Prabhu within a month of taking charge as railway minister on November 10. He had roped in E Sreedharan, principal advisor to Delhi Metro Rail Corporation (DMRC) and its former managing director, last month for suggesting ways of improving railway tendering. Suggesting greater delegation of powers to general managers (GM) and divisional railway managers (DRM), Sreedharan has already submitted an interim report to Prabhu. “Powers will be delegated to GMs and DRMs for speedy implementation of projects. Hope transparency and merit prevails,” Prabhu tweeted after Sreedharan submitted the report last week.

A Comptroller and Auditor General (CAG) report had said last week that the railway did not follow proper accounting norms for financial transactions.

The Railways under the United Progressive Alliance rule had introduced reforms in its tariff policy by introducing fuel adjustment component in both passenger and freight rates. Besides, tariff fixation was also taken out of the Railway Budget announcements. These measures, however, did not help in improving its financial health.

Loaded with the burden of higher salaries and pension, the government-run system spends Rs 93 to earn a hundred. After paying the obligatory dividend and lease charges, the surplus is estimated at a mere Rs 602 crore in the current financial year, substantially down from Rs 11,754 crore in 2007-08. Last year, the Railways ended with a surplus of Rs 3,783 crore, which was Rs 4,160 crore short of the revised target.

The Mittal panel would also identify areas in the existing revenue structure for improving revenue, besides looking for additional avenues for generating and increasing revenues. It would also recommend measures for monetisation of resources of the railways.

On the expenditure side, the committee would suggest measures for reduction in spending. For a long-term modernisation and expansion plan, it would identify impediments and suggest remedial measures.  

CAG’s findings for FY13 also showed the Railways did not follow its own rules and regulations laid down under the financial and engineering code for efficient execution of projects.