Covid-19 impact: Railways looks to FinMin for pension liabilities

Hit by a fall in revenue from freight as well as passenger traffic owing to the Covid-19 pandemic, the Indian Railways has approached the ministry of finance seeking relief in pension liabilities for the current fiscal year.

For 2020-21, staff cost and pension liabilities totalled aro­und Rs 1.46 trillion for the railways. Of this, staff cost was aro­und Rs 92,993 crore while pe­n­sion bill stood at Rs 53,000 crore.

The cumulative revenue from freight, sundry and passenger segments was down to Rs 53,725 crore, a fall of Rs 34,257 crore, during the six months ending September 2020. This was 39 per cent lower than the same period last year. During the same period last year, gross revenue of the railways was Rs 87,982 crore. This was more than the total staff cost of Rs 86,904 crore in 2019-20.

This massive drop in revenue has forced the railways to approach the department of expenditure at the finance ministry seeking relief on the pension front. 

The national transporter has written to the finance ministry recently, saying it would be difficult to meet the pension demand during the current year because of the Covid impact on passenger and freight traffic. It resulted in a drop in revenue, said a person aware about the development. 

But a senior railway official said, “The railways is a robust organisation on a fast path to progress. It would always be able to meet its commitments, including salary and pension.”

The railways is the only government department which meets the pension expenditure of its retirees from its own receipts. 

However, in respect to all other departments, the same is met by the ministry of finance. The railways pays pension from its annual earnings through a pension fund that was introduced in 2003. 

The pension bill is expected to increase from Rs 49,000 crore in 2019-20 (revised estimate) to Rs 53,000 crore this fiscal year. In addition, the railways also has a social service obligation to the tune of around Rs 50,000 crore. 

Last year, the national transporter had informed the government that after implementation of the Seventh Pay Commission’s recommendations, there was a sharp rise in staff cost and absence of commensurate growth in traffic earnings. This made it increasingly difficult to bear the pension expenditure from railway revenues while bearing the social service obligations.  

“Around 25 per cent of the railway earnings go into paying pension to 155 million former employees. We are hoping that it will be done in a graded manner,” Railway Board chairman VK Yadav said in a recent media interview. 

Looking at the revenue front, till October 11, the cumulative revenue from freight traffic for the current fiscal year was seen 15 per cent lower at Rs 53,631 crore. However, showing signs of revival, goods handled by the national transporter in September was seen 19 per cent higher compared to the same period last year. In the October 1-11 period, too, so far, freight saw an increase of 13 per cent compared to the same time last fiscal year.

Following the Covid outbreak, the railways, on March 25, suspended all regular passenger, mail and express trains indefinitely. This included 13,500 passenger trains.