F.No.2005‑B‑260.
Financial Performance of Indian Railways to end of
October, 2005 & initiatives taken for improvement
The financial performance of the Railways
in the first six months of the fiscal has been apprised to Hon’ble FM vide my
note dated 2nd
November, 2005.
I shall be demitting office at the end of this month consequent upon my
superannuation. I deem it a great honour
and privilege to have worked under your dynamic leadership. I am grateful to you for all the support and
guidance which you gave me during my tenure. At this juncture, it is only
appropriate that I provide a brief account of some of important measures that
have been initiated in the area of finance and accounts in Railways, apart from
apprising you of the updated financial performance to end of October, 2005.
Performance to end of October, 2005
The
freight loading to end October, 2005 at 366.92 million tonnes is higher than
that of the corresponding period of previous year by 31.72 million tonnes,
implying growth of 9.5%. The trend of
loading in various commodities remains by and large the same as reported
earlier. The only change being witnessed is a definite tapering off in the
movement of Iron Ore for Export. The growth in originating number of
passengers remains at around 6.5%, well above the targeted figure of 4%.
Taken overall, the traffic earnings to
end of October, 2005 at Rs.29788 cr. have registered a substantial growth of
14.4% over the corresponding period of last year, as against 13.4% to end of
September, 2005. This overall growth
comprises 18.8% growth in goods earnings and 6.2% in passenger earnings
As against the
growth in earnings, ordinary working expenses for the period at Rs.21,957 cr. indicate an increase of 9.8% over the
corresponding period of last year, but are considered to be in order in view of
post budgetary increases in diesel prices and the significantly higher level of
loading. With this increase in earnings
as well as in expenditure, the operating surplus is over Rs.7800 cr.
Initiatives for improvement
Historically,
capital investments in Railways have by and large been funded through budgetary
support received from the General Exchequer.
However, to make adequate provision for capital investment for which
budgetary support alone was falling short, Capital Fund-Railways was created in
1992-93. This fund remained inoperative
after 2001-02, due to insufficient internal resource generation. In order to keep pace with the economic
development, Railways need to increase the throughput capacity and as such,
need to take certain critical and throughput enhancement works on
priority. With the improved performance,
Hon’ble MR has decided to revive the Capital Fund to execute urgent
projects/works of capital nature. A Memorandum for this proposal has since been
submitted to RCC for their concurrence.
MOF has also supported this proposal.
With a view to
transform the Railways into a customer-oriented organization, a review of its
accounting policies and practices has been initiated to introduce a fully
computerized accounting and Management Information System which will support
the existing government reporting requirements as well as will meet all the
accounting standards set in future. The
exercise aims at restructuring accounting system to provide activity based
revenue and cost data to facilitate detailed analysis of profitability of
different operations and on different routes and also to introduce the
flexibility in tariff, besides producing financial statements of the highest
quality and meeting all the commercial accounting requirements internationally
adopted for rail industry. The
consultancy supported by ADB funding has since been finalized.
The Government
has accepted in principle the Twelfth Finance Commission’s recommendation of
introduction of an accrual-based system of accounting in the Government of
India. As far as Ministry of Railways is
concerned, a study undertaken at the
instance of Government Accounting Standards Advisory Board (GASAB), has
concluded that the Railways’ accounting structure is well geared for a smooth
transition.
Steps have been initiated for going into
an in-depth study of the capital structure of the Railways particularly with
reference to the contribution to Depreciation Reserve Fund on a scientific
basis, identification of unproductive and redundant capital assets and the need
for a policy of amortization. Similarly,
a professional agency has been entrusted with the job of evolving a mechanism
for actuarial assessment of pension liability of the Railways, which will help
in managing this liability in a better way.
I hope that these initiatives will in the
long run bring a phenomenal change in the system and enable the Railways to
sustain its development and expansion.
As far as performance of Indian Railway
Finance Corporation (IRFC) of which I am the ex-officio Chairperson, is
concerned, it has been successfully funding about one fourth of Plan
requirements of the Railways at competitive rates. The company has come to acquire the position
of a financial institution of considerable repute. Operations of the Company have increasingly
been setting benchmarks both in the domestic debt market and in the offshore
market amongst the issuers out of India. While the company was ranked by DPE amongst
Top Ten PSUs for its performance in 2001-02 and 2002-03, it expects similar
distinction for 2003-04 also as it has been awarded perfect score of 1.00 for
the year.
Once again, I would like to convey my
thanks and gratitude to you for the support and guidance given to me during my
tenure.
Sd/-
(Vijayalakshmi
Viswanathan) Financial
Commissioner (Railways)
28-11-2005
FM
Thank you. I was deeply impressed by,
and appreciative of, your dedication and sincerity. Yours has been a career
well lived. Please accept my warmest good wishes for your retirement.
Sd/-
(P Chidambaram)
Finance Minister
29.11.2005