Railways has sought a financial grant of about Rs 32,000 crore from Finance Ministry to tide over the the impending impact of 7th Pay Commission recommendations on the public transporter.
In a letter to Finance Minister Arun Jaitley, Railway Minister Suresh Prabhu cited the prevailing financial position of railways, efforts at cost cutting and possible gradual adjustment of fares and other non-tariff revenue measures to absorb the impact while requesting the exchequer’s help for implementation of the Commission recommendations.
“I would therefore earnestly request you to help the Ministry of Railways and handhold it for the implementation of 7th CPC recommendations,” the Railway Minister said in the letter.
“This may be done either through compensation of loss for coaching services (Rs 31,727 crore in 2013-14) or directly by virtue of a revenue grant, matching the amount of the 7th CPC’s liability placed upon railways for the next 3-4 years,” he said.
Prabhu hoped that during this 3-4 years period, railways would be able to absorb the impact from their resources through gradual adjustment of fares and other non-tariff revenue measures.
However, Railway Minister has expressed his reservation about increasing the freight rate in the given scenario contending that it would have a “deleterious impact” on national economy.
He said, “In order to maintain these expenses at the current proportion - at 51.5 per cent of the gross receipts, the railway revenues will need to grow substantially by 40 per cent in 2016-17 which is well nigh impossible given the fact that till October 2015 growth was only 8.4 per cent.
“The first factor of freight earnings originating loading is demand driven and is largely not within the control of railways. The second factor that is freight rates, though is within railways competence, there is hardly any headroom available for increasing the same without affecting railways competitiveness adversely.”
He said, “Moreover, exercising this option will have a deleterious impact on the national economy as well as on critical sectors such as coal, cement, foodgrains.”