Wednesday, January 30, 2008

Railways estimates addition cost of 9000cr due to Sixth Pay Commission.

As Indian Railways readies the Budget for 2008-09, one of the biggest worries it faces is how to keep the profitability momentum with the prospect of wage bill inflating by about Rs 9,000 crore on account of the Sixth Pay Commission.

In the current fiscal, the Railways –which employs 1.4 million workers--has a wage bill of Rs 27,145 crore, including Rs 18,985 crore on staff costs and Rs 8,160 crore on pension charges. The wage bill is about 38 per cent of its gross traffic earnings. When the Fifth Pay Commission came into effect, the Railways wage bill swelled to Rs 14,141 crore (FY98) from Rs 10,515 crore (FY97).

The Fifth Pay Commission had recommended a 31-per cent increase in base salaries. “On the same lines, if the Railways were to provide for a 30-per cent hike in wages on account of the Sixth Pay Commission, we are staring at Rs 9,000 crore increase in our wage bill,” said official sources.

The impact of the fifth Pay Commission effective 1997-98 was strong enough to warrant a reference in the 2001-02 Budget speech made by the then Railway Minister. “Internal resources of railways have also suffered a severe and permanent jolt immediately after implementation of the Fifth Pay Commission recommendations,” Ms Mamata Banerjee had stated.

Thus though there are questions on exactly when the Government would implement the pay hike and to what extent, one thing remains certain: it would be difficult to maintain the current level of operating ratio, more so when funding from Central finances is unlikely to go up substantially. According to former Railway Finance Commissioner Ms Vijayalakshmi Viswanathan, “The impact is likely to be spread over three years, particularly on account of pension.”

The Railways pension fund, which opened at Rs 976 crore (1997-98) went down to Rs 318 crore (1999-2000), and Rs 32 crore (2001-02).

Source : The Hindu