The implementation of the 7th Pay Commission proposals for employees have slightly increased operating ratio for Indian Railways.

railway-budget-at-a-glanceThe pay bonanza to Indian Railways employees after the implementation of the 7th Central Pay Commission (CPC) recommendations has not impacted its finances much, according to the minister in-charge of the portfolio. The operating ratio for 2016-17 would be 94 percent, just above 92 percent as projected in the railway budget.
Operating ratio means the proportion of expenses to revenue earned; for instance, an operating ratio of 94 percent would mean the world’s fourth-largest rail network spends Rs 94 to earn Rs 100.
“We have got a huge liability in the form of seventh pay commission award. The growth in coal and steel loading has been flat. Keeping all this in mind, I think we have done a decent job by controlling the operating ratio at 94,” the Economic Times quoted Prabhu as saying on Monday.

The additional burden on account of implementing the CPC proposals for 13 million employees and approximately 13.78 lakh pensioners was estimated at about Rs 30,000 crore.

Salaries and pensions account for about 40 percent of the rail network’s expenses. In 2014-15, the pension payout was Rs 28,642 crore, according to a reply given by Prabhu to the Parliament on March 16 last year.

Earlier, while presenting the railway budget (for 2016-17) last year, Prabhu had said that staff expenses constrain the network from resource-generation.railway-rupee

“Higher staff cost and pension liability impacts the internal resource position of the Railways,” Prabhu had said in his budget speech, his last since there won’t be a separate from this year.

The railways kept its traffic receipt estimates for 2016-2017 at Rs 1,68,945 crore, translating into a growth of 12.4 percent in passenger earnings at Rs 51,012 crore.

 The capital expenditure outlay by Indian Railways was fixed at Rs 1,21,000 crore, up almost 20 percent from 2015-16.

As already known, from this year onwards, the railway budget will be merged with the general budget likely to be presented by Union Finance Minister Arun Jaitley in the first week of February.