Finance Minister Arun Jaitley Finance Minister Arun Jaitley

Citing poor pace of work in the Railways, the government has cut the gross budgetary support to the national transporter by Rs 12,000 crore for this financial year, effectively not giving any increase in Central funding this year.

The decision comes as a jolt to the national transporter, which is already struggling with capital expenditure, decreased earnings and a huge salary bill, due to the 7th Pay Commission proposals.

Through a letter to the Railways on Tuesday, the Finance Ministry not only cut Central funding by Rs 12,000 crore to bring it down to Rs 28,000 crore, it also refused to help Railways with any funds to meet its salary/pension liabilities arising out of the pay commission recommendations this year.

“… it may be stated that the ceiling of Rs 28,000 crore for Plan Expenditure in Revised Estimate 2015-16 is fixed after careful review of pace of expenditure and the resource position of the government,” said the letter from the Finance Ministry to the Railways.

The Railways, meanwhile, has decided to approach Prime Minister Narendra Modi for a solution since its financial position, due to shortfalls in earnings and a precarious operating ratio, remains on the edge.

The last Union Budget had seen Central funding of Rs 40,000 crore to Railways — the highest ever.

The Finance Ministry letter comes three months after the PMO wrote to Rail Minister Suresh Prabhu highlighting a lack of pace in the execution of works in Railways reflected through its capital expenditure.

The Finance Ministry has also told the transporter that the Centre will not be able to help it financially to run its household, and that railways should raise its own resources for the same.

“Since the liability of the General Revenues towards implementation of the recommendations of the 7th Pay Commission is much larger in comparison to Railways, it is not feasible to finance Railways on this account,” the Finance Ministry has said.

In addition, the Railways has been advised to raise its own resources to meet its liabilities. “As a departmentally run commercial organisation, Railways is expected to meet its revenue expenditure from its revenue receipts,” said the letter issued with the approval of Secretary (Economic Affairs).

The Railways had also requested the Finance Ministry to share its burden of having to keep its fares low and carry essential goods either cheap or even free of cost.

The cost of this obligation has reached Rs 32,000 crore. But this letter decidedly puts an end to that bargaining as well.

Trouble for Railways is not over because so far it has been able to spend only about 44 per cent as capital expenditure with just three months to go — way behind its target of Rs 1 lakh crore. Moreover, taking away Rs 12,000 crore suddenly compounds the problem because the national transporter may have already booked much of the expenditure towards works.

Against this backdrop, the Railways will now seek the PM’S intervention ahead of Union Rail Budget next month.

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