Rs 79,398-crore special support from FinMin may save Covid-hit railways

Even before Covid-19 struck, the national transporter was so short of money that it could provide for only a third of its annual liability.

The railways had to empty out even its pension funds in FY21 to meet current expenses as receipts ran dry due to the Covid-19 pandemic. No railway staff will lose pension in the process since it is a committed liability of the railways, but the hit on the finances of the organisation shows how precarious its position has become.

The railways was saved by a Rs 79,398-crore special support from the finance ministry. Else, it would have ended this fiscal year with an operating ratio of 131.49 per cent against the headline number of 96.96 per cent. This would have made it the highest-ever operating ratio for the national transporter.

In fact, the number had begun to worsen even before the pandemic. For several years, the railways had been under-providing for its pension liabilities. But it has shot up due to Covid-19. 

As a result, the infrastructure organisation estimates it would have fared badly in FY20 too. Its own notes for the accounts estimate that with the required level of “appropriation to pension fund from railway revenues in Actuals 2019-20 and in RE 2020-21, the operating ratio would be 114.19 per cent”. This shall stand as the second worst after the numbers for FY21.

The railways received the “special loan from general revenues for Covid-related resource gap in 2020-21 and to liquidate adverse balance in public account in 2019-20 to pension fund”. The organisation was able to provide only Rs 20,708 crore to the fund in FY20 that offers a dedicated purse for the pension bill of the railways.

The average over the past few years is Rs 50,000 crore-plus per year. The money is provided from the revenues of railways. But even before the pandemic struck, the organisation was so short of money that it could provide for only a third of its annual liability. This is despite pencilling in a Budget Estimate of Rs 53,100 crore. Because the railways lives hand to mouth, the actual transfer happens after the end of the fiscal year. By then Covid had struck.

For FY22, the railways has written Rs 53,300 crore, which it should be able to provide for.