The Railways is in a bind as its stares at an additional outgo of about ₹35,000 crore in 2016-17, if the Seventh Pay Commission’s recommendations are implemented from January 1, 2016.

For, apart from the ₹28,400-crore annual impact, the Railways will also see a January-March 2016 impact of around ₹7,100 crore.

With traffic growth — both passenger and freight — already under strain, it would be difficult for the Railways to increase tariffs to mop up resources to pay higher salaries to over 13 lakh employees and almost an equal number of pensioners. Railways is the only Ministry that meets its entire staff and pension expenses from its own revenues.

To put the number in perspective, the ₹35,000 crore needed to meet the pay panel’s proposals is more than double the Railways’ budgeted surplus of ₹14,000 crore in the current fiscal. As per the budget estimates for this fiscal, the Railways is expected to have a revenue of ₹1,83,578 crore and net revenue of ₹25,076.45 crore, after paying for working expenses, such as the staff, fuel, lease charges and pension.

Even if the Railways were to get a waiver from paying dividend to the government, a long-standing demand, it would be left with a surplus of ₹25,000 crore, which is ₹10,000 crore short of what it would require.

Negative growth In 2015-16, despite a freight rate hike and no passenger fare increase, Railways budgeted a ₹24,000-crore increase in total revenues over the previous fiscal.

It even registered a negative growth in net tonne kilometre for the first seven months this year, a freight productivity parameter that counts both loading and distance performance.

Three years ago, anticipating huge outgoes from the 7th Pay Panel and repayment of a dedicated freight corridor loan, the Railways had created a debt service fund.

This fund is expected to close with ₹1,167 crore this year.

Related Topics