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NIPFP may help compute social obligation costs borne by Indian Railways

LiveMint logoLiveMint 25-06-2017 Jyotika Sood

New Delhi: In what will help in streamlining Indian Railways’ finance, the government plans to task the National Institute of Public Finance and Policy (NIPFP) to find out the social obligation costs borne by the national transporter, several people aware of the development said.

The issue of social obligation costs due to concessions given to senior citizens, defence personnel, sportspersons and cancer patients among others as well as running non-economical rail routes has been plaguing railways’ finance. The decision by Indian Railways to mandate NIPFP to undertake the study follows the finance ministry’s refusal of the Indian Railways’ social obligation costs claim of around Rs30,000 crore till date citing “inaccurate figures”.

The cash-strapped railways has been requesting the finance ministry to bear its social obligation costs.

“The decision has been taken to empanel NIPFP after finance ministry has refused to accept our calculations of social obligation costs. A memorandum of understanding will be signed with the institute soon,” said a senior railway ministry official requesting anonymity.

NIPFP is a research institute under the finance ministry.

Railway ministry spokesperson Anil Saxena confirmed the development.

This comes in the backdrop of the merger of the railway budget with the Union budget which was presented earlier this year. Also, the National Democratic Alliance government unveiled the largest-ever rail budget of Rs1.31 trillion, an 8.26% increase over the Rs1.21 trillion allocated in 2016-17. Indian Railways, the world’s fourth-largest railway system, has also firmed up a medium-term plan of investing Rs8.5 trillion by 2019-20.

“The railways and finance ministries had several meetings and the railways have apprised them of costs incurred by us on social service account. These include lower passenger and freight fares, special concessions, new lines and branch lines. However, the finance ministry is not accepting the low fare argument stating it was railways’ decision and not a social obligation,” said the first railway ministry official cited above.

Earnings from freight traffic continued to fall, declining by 4.4% to Rs1.04 trillion in 2016-17, reflecting the competition railways is facing from airlines and road transport, a slower-than-expected economic recovery and the declining demand for coal.

The official added that the finance ministry is of the view that passenger concessions are going to people who are travelling in reserved categories.

“Their view (finance ministry) is then how can railways say it is for poor as the concessions are for A1, A2, A3 and all categories. If special concession is considered category wise then it (social obligation costs) amounts to only Rs ,600 crore,” the official said.

Railways, which has been losing out freight traffic to roads, clocked revenue of Rs1.65 trillion in 2016-17, a marginal increase over the Rs1.64 trillion registered in 2015-16 due to non-fare revenue such as right of way charges, reimbursements for strategic lines, advertising, land monetization, catering and parking.

“The railway ministry is not correct with its figures. When the finance ministry asked for the branch lines it was running, the national carrier handed over a 17-year-old list of 90 lines in most of which gauge conversion has taken place. Despite this, they are incurring operational expenses on station master etc., on abandoned narrow and metre gauge lines,” said a senior government official aware of the issue.

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The official added that the finance ministry has said that it would accept the railways’ demand provided there was proper computation.

Queries emailed to finance ministry and NIPFP on Friday remained unanswered.

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