Railways funds eroded 93%: CAG

“There was heavy cross-subsidisation from freight services to passenger services. Percentage of freight earnings used to subsidize the losses on passenger and other coaching services ranged between 15.80 per cent and 34.32 per cent during 2007-08 to 2009-10,” the report stated.

Though Railways earned a surplus of Rs 1,404.89 cr during the financial year 2010-11,the accumulated fund balances were substantially depleted indicating a continued poor financial performances by Railways and risk for future sustainability.

Capital fund and development fund showed negative balances of Rs 885.71 cr and Rs 1213.34 cr respectively. “This situation would ultimately affect long term sustainability of railway operations. Railways will be severely handicapped to finance any future developmental expenditure until these funds are recouped over and above the negative amount of Rs 2101 cr out of revenue surplus,” the CAG noted.

Recommending the way forward,CAG has suggested Railways to improve its finances and rationalise both freight and passenger tariffs and also the needs to explore alternate sources to finance its capital expenditure.

“It is essential that Railways increases its market share in bulk commodities where it has an inherent competitive advantage…Railways needs to review all cases of licencing and renting of its assets for timely raising of bills and rationalisation of dues including arrears,” it said.

The report also found dependency of gross budgetary support has been increasing due to shrinkage of internal resources.

“It is important for the railways to review all capital works in progress and take expeditious decision with regard to closure of projects especially unremunerated lines,where there is road connectivity and where the progress with the projects is no longer as valid. There is a need to focus more on viable projects,” the report said.

Railway budgetary mechanism faulty: CAG

Finding fault with the railway budgetary mechanism,Comptroller and Auditor General has observed the national transporter is continuously incurring expenditure over and above the budgetary provisions sanctioned by Parliament.

The CAG report of the fiscal 2010-11 also found railways at fault for not presenting any of the statements of fiscal policy in Parliament as defined in the Fiscal Responsibility and Budget Management Act 2003.

The Audit also observed that follow-up action on the announcements made in the Railway Minister’s budget speech were weak and no proper monitoring system appears to have been set in place as seen from the gaps in the outcome budget.

Increasing trend of unsanctioned expenditure indicated inaction on the part of the administration to get unsanctioned expenditure regularised,besides poor internal check mechanism,the CAG noted in its latest report tabled in Parliament today.

“Instances of misclassification of expenditure continued to occur regularly in railways accounting system. Despite being pointed out by Audit and Public Accounts Committee repeatedly,adequate attention was not paid at various levels to eliminate cases of misclassification of expenditure,” the report said.

PAC had time and again expressed its displeasure over incurring expenditure in excess of the sanctioned grants which was a clear indication of poor budgeting by railways.

Finding a huge gap in the budget as formulated and budget as executed,CAG has found 384 defective budgeting cases.

CAG suggested the Railways need to take a comprehensive relook at its budgeting process and make the projections more realistic,so as to ensure that funds are fully utilised for the purposes sanctioned.

“Railways should strengthen its budgetary mechanism and system of expenditure control so that…expenditure over and above authorisation are minimised,” it said.

The report also suggested that railways should explore a mechanism of estimating supplementary grants more realistically so that fiscal discipline is maintained.

“Railways should fortify its internal controls to effectively reduce the instances of misclassification to foster responsibilities at the level of key controlling officers,” the CAG said.

Safety low priority for Railways: CAG

The Comptroller and Auditor General has observed safety related works are being accorded low priority by Railways.

Though sufficient funds were available,large number of road overbridge (ROB) and road underbridge (RUB) works were pending as on March 2011 and the actual budget allocations reflected low priority due to inadequate commitment by the Railways,the CAG report tabled in Parliament today said.

Construction of these are essential for eliminating unmanned level crossings which are the major reason for train accidents,it said.

The CAG also found that funds meant for ROB and RUB are grossly underutilised.

“Funds were not constraint for execution of ROB/RUB allocated under Road Safety Fund as the funds were grossly underutilised,” the report said.

The CAG has suggested better coordination with state governments for the speedy execution of the works already sanctioned and funds effectively utilised.

Taking note of the slow progress in measures to prevent accidents,the CAG pointed out despite field trials carried out since 2001,a robust and reliable anti-collision device (ACD) has not been developed by railways yet.

The ACD’s field trials and modifications are being carried out since 2000-2001 and site acceptance tests and modifications carried out since November 2006 in 1,736 km of Katihar¿Guwahati-Ledo/Dibrugarh section of Northeast Frontier Railway at a cost of Rs 158.67 crore. But despite the long trial a reliable ACD is yet to be developed so far.

Similarly,the CAG found despite commissioning of the train protection warning system (TPWS) in Southern Railway in May 2009 at a cost of Rs 49.49 crore,the trial reports indicated various failures of the equipment requiring modifications in the software.

“The performance efficiency recorded during trials was between 77 and 90 per cent as against the acceptable level of 99.9 per cent…The TPWS work commenced in 2005 in North Central Railway had not yet been completed despite incurrence of expenditure of Rs 41.54 crore,” the report said.