New Delhi: Bracing for the imminent recommendations of the Sixth Pay Commission, the Indian Railways, the largest employer in India, is setting aside a little more than one-third of its annual wage bill of Rs25,000 crore in the 2008-09 Railway Budget.
Officials close to the development, who did not wish to be identified, said the railways is setting aside Rs9,000 crore. This includes payments towards arrears, since the recommendations will come into effect from 1 April 2007. It has made this assessment based on internal calculations that have been put together in consultations with the finance ministry.
This was disclosed by officials, who have viewed internal communication between the railway ministry, finance ministry and the Planning Commission, but did not wish to be identified.
“We can make a clear assessment on the burden only after the pay commission makes an announcement,’ said V.N. Mathur, member (traffic) of the Railway Board, while declining to comment on the specific numbers.
Finance commissioner Sudha Chaube could not be reached for comments.
The Sixth Pay Commission was set up to overhaul the salaries of all government officials and bring them in line with “the demands of the emerging global economic scenario”.
According to the same railway ministry officials, the annual increase in wage bill would be around Rs3,000 crore. The railways has some 1.4 million employees, down from around 1.6 million in the early 1990s.
Last year, the railways’ cash surplus after deducting for costs, including dividends, worked out to Rs16,000 crore.
This year, with freight performance on target, the railways is projecting that the surplus would be higher at Rs21,000 crore in 2008-09.
Therefore officials argue that the railways would be in a position to absorb the additional burden resulting out of the recommendations of the pay commission.
Peeyush Naidu, principal consultant, PricewaterhouseCoopers, said, “Railways has been enjoying a buoyant economy. In future also it will make more money on account of (the proposed) dedicated freight corridor. And income accruals on account of this project will help it offset expenditure arising out of additional wage burden.”
The railways had demanded Rs13,250 crore as gross budgetary support for 2008-09. The likely allocation, however, is going to be Rs7,100 crore, a 3% increase over 2007-08.
A planning commission officer said the “railways can finance it’s needs through more borrowings.”
“The railways does face some strain whenever the pay commission revision happens. But right now the finances of the railways is better off and therefore it is in a better position to absorb the burden,” said Akhileshwar Sahai, president, government and multilateral advisory services, Feedback Ventures.