Title - Railways facing severe financial crunch: CAG

The Comptroller and Auditor General (CAG) has taken the crunch-hit railways to task for pursuing a "faulty Budget mechanism" and ignoring a "financial calamity".Pointing at dipping passenger revenue receipts, the CAG report on the nation's largest public transporter said: "The railways is facing a severe financial crunch and their accumulated funds have eroded by 93 per cent."It advised the railways to improve its finances, rationalise freight and passenger tariffs and explore other options to fund its capital expenditure."The railways has not been able to meet operational cost of passenger and other coaching services. There was heavy cross-subsidisation from freight to passenger services. Percentage of freight earnings used to subsidise 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 says.Though the railways earned a surplus of Rs.1,404.89 crore in the 2010-11 fiscal, the accumulated fund balances were substantially depleted because of continued poor financial performances. "Capital funds and development funds showed negative balances of Rs.885.71 crore and Rs.1213.34 crore respectively. This situation will ultimately affect long-term sustainability of railway operations. Railways will be severely handicapped to finance development expenditure in the future," the reports warns.To tide over the crisis, the CAG said: "It is essential for the railways to increase its market-share in bulk commodities where it has an inherent competitive advantage. The railways needs to review all cases of licencing and renting of its assets for timely raising of bills and rationalisation of dues, including arrears.""The dependency of gross budgetary support has been increasing because of shrinkage of internal resources. There is a need to focus more on viable projects," it added.Finding fault with its Budget mechanism, the CAG said: "The railways is continuously incurring expenditure over and above the budgetary provisions sanctioned by Parliament. The audit also observed that followup action on the announcements made in the railway minister's Budget speech was weak and no proper monitoring system appears to have been set in place as seen from the gaps in the outcome budget."It reminded that the public accounts committee had repeatedly expressed its displeasure over spending in excess of the sanctioned grants "which was a clear indication of poor budgeting by the railways".CAG has found 384 defective budgeting cases. It suggested the railways to relook at its budgeting process and make the projections more realistic.