According to the Comptroller and Auditor General (CAG) of India, it has identified a stark understatement of expenditure by the Indian Railways in the financial year 2022-23. The recently tabled report in Parliament paints a different picture in terms of the earnings and actual losses, which looks different from the official report regarding the fiscal health of Railways.
Actual Losses against Earnings
The report comes from the official accounts of the railway, which had net profit in 2022-23 to the tune of ₹2,517.38 crore. This was calculated in terms of claims from passenger, freight, and other services against working total expenditure of ₹2,37,659.58 crore, thus resulting in a tiny surplus.
However, a very contrasting fact emerged from the analysis of the CAG on cross-subsidization, where freight profits cover losses from passenger services. All expenditures incurred for train operations for ₹2,45,393.71 crore met revenues of only ₹2,40,136.64 crore and exposed true net losses of about ₹5,257.07 crore.
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“The total working expenditure in fiscal summaries has been understated, which misrepresents the true Operating Ratio (OR),” underscored the audit report. Given the understatement of expenditure, the OR is supposed to have stood at 101.33, rather than the reported 98.10. An elevated OR indicates reduced efficiency in generating surplus.
Cross-Subsidization Hides Losses of Passenger Services
Railways received ₹74,289.66 crore from passenger services and ₹1,65,846.98 crore from freight services, thus accounting for the total revenue of ₹2,40,136.64 crore. Expenses are significantly higher: ₹1,11,062.87 crore for goods and ₹1,34,330.84 crore for passenger services, resulting in a huge passenger service loss of ₹60,041.18 crore.
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This is because profits from freight operations, which amounted to ₹54,784 crore, offset the losses incurred by such passenger services. It is one of the most common practices.
Heavy Losses in Lower Classes
The audit emphasized that the bulk of operational losses was concentrated in Sleeper Class, Ordinary Class, and Second-Class services, which incurred losses of ₹17,819.21 crore, ₹17,076.90 crore, and ₹16,357.02 crore, respectively. Most importantly, these findings underline the finances of making available affordable train travel to millions of people.
The CAG report raises serious concerns regarding transparency in the accounts of the railway. Underreported expenditures misrepresent the actual fiscal efficiency and conceal the state of affairs from public scrutiny, especially in the case of passenger services. Analysts contend that there is a dire need for a rethink of the OR and enhanced disclosure in fiscal reporting to present an accurate picture of the workings of Indian Railways.
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