The Indian Railways is on the verge of running into a cash deficit with its gross traffic earnings for 2009-10 showing a fresh shortfall of Rs 1,700 crore (Rs 17 billion).
In the Railway Budget presented on February 24, the Railways had revised downwards the revenue excess estimate by nearly 65 per cent to Rs 951 crore (Rs 9.51 billion) from the earlier projection of Rs 2,642 crore (Rs 26.42 billion).
If the current shortfall in receipts from traffic operations is accounted for under this head, the Indian Railways would be reporting a deficit in the very first year of Railway Minister Mamata Banerjee's tenure in the United Progressive Alliance government.
Experts, however, say it is more likely that the ministry will further reduce resources appropriated to the Depreciation Reserve Fund to make up for the decline in earnings and to continue to show on books a cash excess.
A former member of the Railway Board said, "Last financial year's provisions to the DRF were reduced by a third to Rs 4,600 crore (Rs 46 billion) from Rs 7,000 crore (Rs 70 billion) provided for the year earlier. Now with reduced earnings, appropriation to DRF is likely to be adjusted further so as to depict an excess on records."
According to the accounting norms followed by the railways, total expenses incurred and the dividend payments made by the ministry are deducted from overall earnings to report a cash surplus. Appropriations are then made to DRF, the remaining amount termed 'excess' is transferred to the Development Fund and the Capital Fund.
In the present scenario, traffic receipts have fallen by over Rs 1,700 crore (Rs 17 billion) to Rs 86,644 crore (Rs 866.44 billion) from the revised target of Rs 88,356 crore (Rs 883.56 billion).
Railways have registered a shortfall of Rs 455 crore (Rs 4.55 billion) in goods earnings and Rs 300 crore (RS 3 billion) in passenger operations (from the revised targets of Rs 58,715 crore (Rs 587.15 billion) and Rs 24,057 crore (Rs 240.57 billion), respectively). Sundry earnings have taken a hit of Rs 950 crore (Rs 9.5 billion) in the year.
Assuming that total expenditure incurred and dividend payable by the ministry remain the same as projected in the revised estimate, the Railways' cash surplus stands to decline. The ministry can, however, instead of depicting a reduced excess below Rs 951 crore (Rs 9.51 billion) can simply curtail the amount set aside for the DRF.
Another official formerly associated with the Railway Board added, "Railways' finances are taking a hit due to rising expenses and falling income. Adjusting fund balances in such a manner certainly does not augur well for the health of the organization.
As many as 7,400 million people travelled last year on the network, which stretches over 64,000 km. Proper maintenance of tracks is extremely crucial and this stands to be affected by the depleting reserves in DRF."
Initially, in 2009-10 of the Rs 2,642 crore (Rs 26.42 billion) depicted as excess in the financial statement of the ministry, Rs 2,000 crore (Rs 20 billion) was appropriated to the Development Fund and the remaining Rs 642 crore (Rs 6.42 billion) to the Capital Fund.
With the total expenditure rising to around Rs 84,200 crore (Rs 842 billion) (from the earlier estimated Rs 82,500 crore (Rs 825 billion)) in the course of the year, appropriation to Development Fund fell to Rs 951 crore (RS 9.51 billion). No resources remained available for allocation to the Capital Fund at the end of the fiscal.
Total receipts, which include traffic receipts as well as miscellaneous income, for the year were projected at Rs 90,713 crore (Rs 907.13 billion).
Cash excess for 2009-10 has come closest to the decade-old low of Rs 763 crore (Rs 7.63 billion) recorded in 2000-01. Average revenue excess reported by the railways in the five years during the tenure of former Railway Minister Lalu Prasad is Rs7,280 crore (Rs 72.8 billion), a number which is over 85 per cent higher than the present apparent excess of Rs 951 crore.
