7th CPC Expenditure: Finance ministry rejects railway ministry’s request for Rs32,000 crore

Finance ministry rejects railway ministry’s request for Rs32,000 crore

New Delhi: The finance ministry has rejected the request of the railways for Rs.32,000 crore as revenue grant, sought to tide over the impending impact of the Seventh Pay Commission recommendations on the public transporter.

In a communication to the railways, the finance ministry has categorically rejected the Rs.32,000 crore demand expressing its inability to provide the grant, and has asked the public transporter to raise its own resources to manage the finance, said a senior railway ministry official close to the development on the matter.

Earlier, railway minister Suresh Prabhu had written a letter to finance minister Arun Jaitley seeking Rs.32,000 crore as grant from the exchequer’s for implementation of the commission’s recommendations and cited the difficult financial position that the railways is passing through.

“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.

Prabhu hoped that during the coming three-four years, railways would be able to absorb the impact from their resources through gradual adjustment of fares and other non-tariff revenue measures. However, after the rejection of the demand, there would be a fresh attempt by the railway ministry to take up the issue with the finance ministry.

According to the Seventh Pay Commission report, the annual financial impact on the railways will be approximately Rs.28,450 crore in addition to the normal growth which will require to be built into the railway budget 2016-17.

The initial assessment, however, is that this additional impact would be around Rs.30,031 crore over and above the normal assessed growth of Rs.10,816 crore. Prabhu has repeatedly maintained that the pay commission burden is “unbearable” and the railways cannot implement it without government help.

At present, the railways is facing a financial crunch with earnings from freight and passenger earnings below the target. Pay and allowances and pension account for 51.5% of the gross receipts of railways. With the financial impact of the 7th CPC, this will increase to 68% of the gross receipts in 2016-17 at present level of growth. Railways has put in place serious cost-cutting measures and are focusing on fuel management. PTI