Railways Will Incur Rs 240 Crore Loss

Railways will incur a loss of Rs 240 crore in the current fiscal year. This is because of the levying of a cess of Re 1 per litre of diesel, in the wake of the creation of a central road fund.

A senior Railway Board official told Business Standard that while the Railways would bear an expenditure of Rs 600 crore because of the cess, it has been awarded a share of only Rs 360 crore from the road fund.

The Re 1 cess on per litre of diesel would generate Rs 5,000 crore in the current fiscal for the central road fund.

 

Of Rs 5,000 crore, the National Highway Development Project has been awarded Rs 2,010 crore and a sum of Rs 990 crore has been allotted for development of state roads.

According to the official, the cost of Rs 600 crore due to the cess should have been covered from the road fund as Railways was heading towards bankruptcy with mounting cash loss in the current account.

He said the Railways must be compensated by the government for the social and commercially unviable projects for clearing the financial mess. The department required a subsidy of Rs 4,000 crore, considering the additional burden of Rs 6,000 crore due to the recommendations of the Fifth Pay Commission and the social obligation. The depreciation resource fund has been maintained by borrowings, the official added.

As an alternative to the subsidy the Centre could also give Railways a 1 per cent share of excise and customs to create a Rail Infrastructure Development Fund. He ruled out the idea of putting a cess on freight for creating the fund.

A 1 per cent cess on freight would generate only Rs 350 crore annually. And, anything more than that becomes unviable considering the fact that freight was on the higher side and the Railways was losing market share to the road sector.

He said as an immediate measure the Railways introduced a couple of cost cutting measures including 2 per cent cut in staff recruitment coupled with infusion of better technology to cope up with reduced manpower and plugging the areas of inefficiency by initiating the process of zero-based budgeting.

The official said the Railways also hived off the catering service by forming Catering and Tourism Corporation to wipe out the losses accumulated by the catering services.

The Railways would also float a joint venture for charting out business plan to leverage non-productive asset by commercialisation of land. It has also plans to reap the benefit of Internet in the retail business of ticketing.

The official further informed that the Konkan Railway project was losing Rs 300 crore per year.