Finance ministry turns down railway ministry’s demand for Rs32,000-cr grant

The finance ministry has rejected the railway ministry's request for financial assistance to the tune of Rs32,000 crore to meet the additional expenditure brought about by the Seventh Pay Commission recommendations.

Railways, which has proposed investments worth about Rs85,000 crore over the next five years, had requested finance minister Arun Jaitley earlier this month for a budget grant of Rs32,000 crore to absorb the impact of wage hike (See: Prabhu seeks Rs32,000-cr govt support to implement pay panel award).

In his letter to the finance minister, railway minister Suresh Prabhu had pointed out that the proposed hike in salaries would upset the Railways' investment projections and growth expectations.

''I would therefore earnestly request you to help the ministry of railways and handhold it for the implementation of 7th CPC recommendations,'' the railway minister said in the letter last month.

The finance ministry, however, categorically rejected the demand expressing its inability to provide the grant, and has asked the public transporter to raise its own resources to manage the finance, railway ministry sources said.

The railway minister had earlier pointed out that the Railways would need at least two to three years to absorb the impact of the wage hike through gradual adjustment of fares and other non-tariff revenue measures.

Although the demand has been rejected, the railway ministry is expected to take up the matter with the finance ministry or with the prime minister as it is extremely difficult for Railways to find resources to such extend at present.

The Seventh Pay Commission recommendation is expected to push up Railway's wage bill by around Rs28,450 crore. Since this will be in addition to the growth needs of the national transporter, the budget 2016-17 will have to provide for such fund requirements.

Pay and allowances and pension already account for 51.5 per cent of the gross receipts of Railways. With the financial impact of the 7th CPC, this will increase to 68 per cent of the estimated gross receipts in 2016-17.

Prabhu has repeatedly maintained that the pay commission burden is ''unbearable'' and the railways cannot implement it without government help.

The Railways is already facing a financial crunch with earnings from freight and passenger earnings falling below target. Railways has also put in place serious cost-cutting measures and are focusing on fuel management.