CAG flags ₹573 crore in lapses across Indian Railways in audit report

New Delhi: India’s national auditor has flagged over ₹573 crore in financial lapses and operational inefficiencies across the Ministry of Railways, revealing systemic weaknesses in revenue recovery, asset management, and project execution across multiple zones.

The findings were presented in Audit Report No. 5 of 2025 by the Comptroller and Auditor General of India (CAG), tabled in the Lok Sabha on Monday. The report, previously laid in the Rajya Sabha on 4 April, covers 25 key audit observations based on test audits conducted up to FY23, with updates from subsequent periods where applicable.

These findings come even as Indian Railways pushes for greater efficiency, private investment, and large-scale infrastructure modernisation. The CAG's observations highlight persistent challenges in revenue management, contract enforcement, and planning that could undermine the sector’s reform ambitions

The Comptroller and Auditor General of India, the country’s apex audit authority, is currently headed by K. Sanjay Murthy, who assumed office on 21 November 2024.

Revenue recovery shortfalls

One of the costliest lapses highlighted in the report was the short recovery of land licence fees worth ₹148.61 crore by Northern Railway from five government-aided schools, due to non-compliance with Railway Board directives. Another significant shortfall involved nine railway zones failing to recover ₹55.51 crore in contributions to District Mineral Foundations (DMF) from contractors engaged in mining-related work, despite collecting royalty amounts.

East Central Railway incurred a revenue loss of ₹50.77 crore by failing to levy shunting charges at Bina siding (BCSK) between April 2020 and March 2023. Similarly, South Central and Northeast Frontier Railways failed to realise ₹25.48 crore for deposit works, while delays in renewing licences for VHF set—Very High Frequency radio communication equipment used by Indian Railways for real-time communication between loco pilots, station masters, guards, and control rooms—cost South Central Railway ₹23.16 crore in late fees.

In South Western Railway, the express train between Satya Sai Prasanthi Nilayam and Bengaluru continued to run for six years despite low passenger numbers, resulting in a loss of ₹17.47 crore, the CAG report noted.

Failures to upgrade certain routes for higher axle-loads resulted in losses as well. Western Railway lost ₹12.62 crore due to inaction, and Southern Railway lost ₹5.43 crore on the Karur–Nagercoil section. West Central Railway failed to supply rakes against premium indents, resulting in a potential loss of ₹6.16 crore, while South Eastern Railway lost ₹10.25 crore in freight earnings by allowing unfit wagons to run empty.

The audit flagged several instances of public funds tied up in unused or incomplete infrastructure.

South Western Railway constructed a Road Over Bridge that remains unused for over five years due to lack of coordination with the Karnataka government, blocking ₹11.81 crore. The non-commissioning of a loco trip shed in New Jalpaiguri tied up another ₹9.33 crore, while poor planning of a terminal station in New Garia resulted in infructuous expenditure of ₹7.62 crore.

Procurement and asset management issues

The report highlighted multiple instances of mismanaged procurement and underutilised railway assets.

In Northeast Frontier Railway, the awarding of contracts at inflated rates led to an undue benefit of ₹9.4 crore to contractors. In another case, Eastern Railway could not claim ₹6.45 crore in input tax credit on GST paid, due to erroneous and unrectified flagging of works contract bills.

Eastern Railway also proceeded with the procurement of a Coach Shot Blasting Plant worth ₹12.66 crore for Liluah Workshop, despite internal assessments questioning its suitability. The associated painting work was later outsourced, leaving the equipment largely unused.

Further, the CAG flagged underutilisation of 28 Nilgiri Mountain Railway coaches built by Southern Railway and Integral Coach Factory without consulting the Research, Design and Standards Organisation.

The audit flagged an ineligible freight concession of ₹11.02 crore granted by Southern Railway under the Station-to-Station Rates (STS) scheme. Procurement irregularities and failure to consult relevant technical bodies led to additional costs and underused rolling stock.

An unused Coach Shot Blasting Plant at Liluah and unused Nilgiri Mountain Railway coaches worth ₹27.91 crore were also listed as examples of inefficient asset deployment.