Ministry of Railways resorted to window dressing to show better operating ratio, CAG tells Parliament

New Delhi: The Comptroller and Auditor General (CAG) on Wednesday hit out at the Indian Railways, saying that it had resorted to "window dressing" to present its operating ratio in a better light during financial year 2018-19 by including advance freight payment in its calculations.

The CAG report also raised concerns over delays in projects over the past five years due to "inefficiency" of zones and "weak monitoring" by the Railway Board.

The CAG report on Railways Finances, tabled in Parliament on Wednesday, said that against the target of 92.8 per cent in the Budget Estimates, the operating ratio (OR) of railways was 97.29 per cent in 2018-19.

"This meant that the railways spent Rs 97.29 to earn Rs 100," it said.

"However, if advance freight of Rs 8,351 crore from NTPC and CONCOR was not included in the earnings of 2018-19, operating ratio would have been 101.77 per cent instead of 97.29 per cent," it said.

The CAG said that the railways' net surplus in 2018-19 was Rs 3,773.86 crore.

"Railways would have ended with a negative balance of Rs 7,334.85 crore but for receipt of advance freight and less appropriation to the DRF and Pension Fund. Ministry of Railways (MoR) resorted to window dressing for presenting the working expenses and operating ratio in a better light," it said.

Operating ratio represents the ratio of working expenses to traffic earnings. A higher ratio indicates poorer ability to generate a surplus.

The government auditor also cast doubts over the railways' use of its Extra Budgetary Resources (EBR) for project financing which started from 2015-16 onwards in its latest report.

While financial assistance of Rs 1.50 lakh crore was agreed to by the Life Insurance Corporation (LIC) over a period of five years (2015-20), the audit observed that the financing arrangement with LIC materialised only partially due to regulatory constraints.

"During 2015-19, only Rs 16,200 crore could be raised from the LIC. Railway Ministry recouped the shortfall of Rs 49,164 crore by raising funds through short-term/medium term market borrowings which carry higher rate of interest," it said.

It also pointed out that progress remained slow in projects which were to be completed during 2015-20, due to "inefficiency" of the Zonal Railways and "weak monitoring" at the Railway Board level.

"Scrutiny of records relating to 395 projects funded from EBR revealed that 268 projects were still in progress as on March 31, 2019. This had resulted in a blockade of Rs 48,536 crore EBR funds besides defeating the intended objective of generation of revenue for debt servicing. Review of identification and sanction of projects for EBR funding revealed that financially unviable projects were sanctioned," it said.

The CAG further pointed out that an amount of Rs 15,922 crore was incurred from EBR towards 79 unremunerative projects. The criteria for exclusion of projects pending land acquisition and other norms was not followed.

The CAG report also said that 111 such projects were funded from EBR. None of these were completed as on March 31, 2019. There were instances of irregular utilisation to the tune of Rs 1,495 crore from EBR funds.

It further said that during 2018-19, the national transporter only generated total internal earnings of Rs 1,90,507 crore against the targeted internal earnings of Rs 2,01,090 crore.

"The Railways could not achieve even revised estimate target of Rs 1,97,214 crore. The total internal earnings also included freight advance of Rs 8,351 crore received from NTPC and CONCOR for transportation of goods in 2019-20.

"There was heavy dependence on transportation of coal which constituted around 47 per cent of the total freight earnings of Rs 51,067 crore during 2018-19. Any shift in bulk commodities transport pattern could affect the freight earnings significantly," the CAG noted.