Author: Raghvendra Rao
Publication: The New Indian Express
Date: September 14, 2007
URL: http://www.indianexpress.com/story-print/216637/
Railway Minister Lalu Prasad's proud declaration,
made while presenting the Railway Budget this February, that Indian Railways
(IR) would generate a cash surplus before dividend of Rs 20,000 crore in 2006-07
has turned out to be inflated. An investigation by The Indian Express has
revealed that the IR 'earned' Rs 2,690 crore - or 13.3 per cent of the declared
surplus (Rs 20,153.49 crore) - not by transporting more people or goods, but
by changing its accounting procedures.
Replying to a right to information (RTI) application
made by The Indian Express, the Railway Ministry has conceded that three accounting
policy changes made by IR increased its surplus by Rs 2,689.97 crore in 2006-07.
Excluding this amount, the 2006-07 cash surplus would fall to Rs 17,463.5
crore - a smaller increase over the 2005-06 figure of Rs 14,700 crore.
While two of these changes got a line in Lalu's
Budget speech, the third - the biggest contributor to the Rs 2,689.97 crore
swell - didn't even get a mention. Railway Board financial commissioner Sudha
Chobe did not respond to an appointment request or a questionnaire sent by
us on the accounting changes relating to three entries:-
Lease charges payable to IRFC (Rs 1,720.12
crore): IR leases rolling stock from Indian Railways Finance Corporation (IRFC)
and pays lease charges. Earlier, IR used to book this amount to its working
expenses. From 2005-06, though, it started booking the capital component of
lease charges as capital expenditure sourced through a Capital Fund. Simply
put, as an asset, rather than an expense.
The Comptroller and Auditor General (CAG)
of India hasn't agreed to this change. In its 2005-06 report, its latest,
CAG said, "The charging of the capital component to revenue was not in
order." Further, CAG noted, "Railways needed to appropriate funds
to the Capital Fund, from which the capital portion of the lease charges are
finally paid, from the surplus available with them." According to the
report, the Railways is now considering doing that.
Interest on IR fund balances (Rs 660.85 crore):
The Finance Ministry pays interest on the closing balance of various IR funds
(Depreciation Reserve Fund, Pension Fund, Development Fund and Capital Fund).
Earlier, this interest was adjusted to IR funds through the year-end proforma
adjustment with the Finance Ministry.
From 2006-07, IR decided to first credit the
interest income accruing on its fund balances to 'miscellaneous receipts'
and subsequently debit an equal amount to the same funds. CAG hasn't agreed
to this change either. "If the interest amount is received under miscellaneous
receipts, the surplus would be enhanced artificially," says a CAG letter
to IR.
Losses on strategic lines (Rs 309 crore):
The Centre compensates IR for the losses it incurs on strategic lines. Previously,
IR used to deduct the compensatory grant from the annual dividend payable
by it to the government. However, from 2006-07, IR decided to deduct the compensatory
grant from its working expenditure, saying that "the reimbursement of
losses should rightly go for reducing the excess expenditure".
Simultaneously, it didn't make any deductions
from the dividend payable. The Railway Convention Committee, in its latest
report, has recommended that IR get CAG's views; CAG is yet to approve this
change.
Accounting for the surplus
The claim
"The Railways is poised to create history
by generating a cash surplus before dividend of Rs 20,000 crore in 2006-07,
as against Rs 14,700 crore in the previous year."
- Railway Minister Lalu Prasad Yadav, presenting
the Railway budget in February
The reality
Of the Rs 20,153.5 crore cash surplus before
dividend declared by the Railways, Rs 2,690 crore (13.5%) is the result of
a change in accounting procedures relating to three entries:
Lease charges payable to IRFC: Rs 1,720.12
crore
Interest on Railways fund balances: Rs 660.85
crore
Losses on strategic lines: Rs 309 crore
