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Wednesday, Feb 23, 2005

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DEA data on railway system reveals paradox

Sudhanshu Ranade

Chennai , Feb. 22

IN A paper on Central Government subsidies recently posted on its Web site, the Department of Economic Affairs (DEA) of the Finance Ministry has presented summary data about the Indian Railway system that suggest conclusions contrary to the impression sometimes conveyed by the Railway administration.

According to this paper, the total Railway costs for 2002/2003, capital as well as current, were Rs 37,377 crore, a figure that was comfortably exceeded by receipts for that year, which are shown in DEA's paper at Rs 42,741 crore.

Driving home the point, the last column in the relevant table shows the rate of recovery of costs for the Indian Railways for that year as 114.4 per cent. Provisional figures given by the DEA paper for the more recent year - 2003-2004 - show the recovery rate at a somewhat improbable level of 157.6 per cent, with total costs pegged at Rs 28,491 crore (of which Rs 21,403 are shown as current costs), against total receipts adding up to Rs 44,912 crore.

It is not clear how cost recovery could suddenly have increased so much, since, according to DEA figures, the enhanced recovery was mainly the result of a dramatic Rs 8,000-crore drop in operating costs and only in part due to a relatively small (Rs 2,000 crore) increase in receipts.

Even allowing for a possibly dramatic revision of the DEA's provisional figures for 2003-2004, the overall tone of the paper put out by this department of the Ministry of Finance does not fit too well with the statement by some senior railway sources that cost recovery rates of the railways have not been keeping pace with inflation. This, of course, does not rule out the possibility that certain sectors or business segments might not be adequately recovering costs.

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