CAG asks railways to curb losses in passenger segment

Taking note of losses in train operation, Comptroller and Auditor General of India asked the Railways to revisit passenger and other coaching tariff so as to recover the cost of operations in a phased manner and reduce losses in its core activities.
CAG in its latest report tabled today observed that during 2013-14, there was a loss of Rs 31,727.44 crore on passenger and other coaching services.
In the freight services, railways earned a profit of Rs 32,641.69 crore and was able to retain 2.80 per cent of the profit on freight earning after subsidizing the loss on passenger services in 2013-14 as compared to 21.66 per cent in the previous year, showing a shortfall in the operational profit.

All category of passenger services (except AC 3 Tier) incurred losses in 2013-14.
Pointing out the public transporter's financial crunch, CAG noted that non-availability of sufficient funds in depreciation reserve fund (DRF) to replace the overaged assets is indicative of its "poor financial health".
Railways maintains DRF for replacement and renewal of existing assets.

However, CAG found that contribution to DRF was not made as a result there was a huge backlog of over aged assets amounting to Rs 47,678.65 crore (up to 2014-15), out of which railways had spent Rs 7,286.93 crore in 2014-15 on replacement/renewal of assets.
The remaining overaged assets in the railway system were required to be replaced for safe running of trains. DRF closed with balances of Rs 1,777.12 crore.

In 2010-11, the balance in the Railway funds was Rs 342.51 crore only. The balance increased from Rs 6,025.28 crore in 2013-14 to Rs 6,872.73 crore at the end of the year 2014-15.
However, CAG noted, railways started payment of capital
component of lease charges to IRFC from Capital Fund from 2014-15 and made a payment of Rs 5,449.24 crore and the Capital Fund closed at Rs 1,388.90 crore at the end of 2014-15.
Depreciation Reserve Fund and Pension Fund closed with balances of Rs 1,777.12 crore and Rs 1,360.36 crore respectively in 2014-15.
Further, the contribution to the DRF was not made as per requirement despite there being a huge backlog of overaged assets amounting to Rs 47,678.65 crore in the railway system required to be replaced for safe running of trains.

"Railways should explore suitable means to improve the fund balances," CAG suggested.
On budget exercise, CAG has recommended that Railways need to strengthen the process of budgetary estimation so that the supplementary demands for grants do not remain unutilised or become short of the requirement.
"Cases of defects in budgeting need to be analysed and measures taken to avoid recurrence in future," it said.