Pay panel award may keep railways cost optimisation under stress: Official

Life Insurance Corporation of India (LIC) has offered Rs 1.5 lakh crore for development of railways

Cost optimisation efforts of the Indian Railways will be under pressure this financial year due to implementation of the Seventh Pay Commission recommendations, a top official has said.

"This fiscal, the cost optimisation move of the railways will be under pressure owing to implementation of the recommendations of the Seventh Pay Commission," Sanjay Mookherjee, financial commissioner, Railway Board, told PTI.

During 2015-16, he said, the Railways saved around Rs 12,000 crore, of which Rs 4,000 crore came from fuel.

The balance Rs 8,000 crore was from various austerity measures and also by way of increasing efficiency.

According to Mookherjee, the additional burden due to the Pay panel recommendations would be around Rs 30,000 crore per annum.

To meet this additional liability, the Indian Railways had built a corpus for the last three years through developing certain funds. "Part of the liability will be met from these funds and the balance through internal resource generation," he explained.

However, he made it clear that development and expansion of the railways would not be hit as the resources were provided by the government while Life Insurance Corporation of India (LIC) had offered Rs 1.5 lakh crore.

The LIC funds will be used to develop infrastructure and the railways and has a servicing period of 30 years.

Through additional resource generation, the target for finances this year was to increase 10.1% to Rs 1.85 lakh crore from the earlier Rs 1.67 lakh crore.

Besides, the Indian Railway Finance Corporation will raise Rs 20,000 crore from the market during 2016-17, the official said.

During the year, the railways is expected to mobilise a substantial chunk of funds through dynamic pricing, realisation from freight by widening the basket of commodities and higher containerisation.

The railways would also operate a cold chain infrastructure through a separate subsidiary called Translog, he added.