Railways Weighed Down By Pension Burden

Successive Pay Commissions have given rise to this situation, raising the operating ratio of the Railways

- TS Ramakrishnan

The report submitted by the Comptroller and Auditor General of India (CAG) in December 2019 underscored that the operating ratio (ratio of operating expenses to operating revenue) of Indian Railways (IR) has been continuously increasing.

After scrutinising the financial parameters of IR in FY 2017-18, the CAG report mentioned that the operating ratio of 98.44 per cent would have increased to 102.66 per cent had IR not received advance receipts from NTPC and IRCON to the tune of ₹7,342 crore. It also highlighted that IR decreased the allocation of Depreciation Reserve Fund by 68 per cent, which would result in piling up of “throw forward” of works to the tune of about ₹1 lakh crore.

There are essentially two components that contribute significantly to the operating expenses. The first one is salary and other allowances, including bonus given to the employees on the roll. The second one is the pension and family pension paid to the pensioners and their spouses respectively till they live, which includes pensioners after superannuation and those who opted for voluntary retirement. Even in the 1950s, the share of salary and pension was about 53 per cent of the total operating expenses and it remained about the same level with smaller variations till the implementation of the Sixth Pay Commission in August 2008.

The committee of professors from Xavier Labour Relations Institute (XLRI) Jamshedpur helped the Sixth Pay Commission to arrive at the true remuneration of government employees considering all the benefits they get during service and during their retirement in comparison to the gross salary they get every month, and estimated that the true salary is 2.25 times of that gross salary. However, India witnessed a surge in the salary of private-sector employees in the first decade of 21st century till the global economic slowdown in 2008 followed by moderate Indian growth story.