Railways bleed ₹2,604 Crore: Government Audit Uncovers Widespread Mismanagement

According to a worrying report released by the Comptroller and Auditor General of India, the Ministry of Railways lost as much as ₹2,604.40 crore (£281 million) during the financial year ending March 2022 because of serious financial mismanagement, operational inefficiency, and non-compliance with the regime prescribed in guidelines/rules. The audit detailed a long list of failures across several zones, raising serious concerns about governance and oversight within what still remains one of the world’s largest railway networks.

The four-chapter report, comprising 33 separate observations, is a scathing indictment of the state-run railways in India. It has pointed out a slew of ailments—right from expensive mismanagement of loans to ignored taxes and lost opportunities for earning revenues. Probably the most significant finding relates to an astounding loss of ₹834.72 crore incurred on account of interest paid towards a loan availed of by IRCON International Limited—a public sector construction company under the Ministry of Railways—for a land development project that never came into being.

“Financial decisions were made without adequate feasibility studies, leading to this substantial loss,” the report noted, pointing out that due diligence has long been lacking in such matters within Indian Railways.

Another glaring lapse was that the East Coast Railway did not levy the shunting charges in its operations, which is one of the basic needs, thereby losing about ₹ 149.12 crore in revenue. On the other hand, Audit found the South East Central Railway and Western Railway failing to collect Goods and Services Tax from some of the service providers to the tune of ₹ 13.43 crore.

It has also pegged the failure of West Central Railway in revising license fees for land leased to the Department of Posts at a loss of ₹10.61 crore (£1 million). On the other hand, unauthorized freight concessions by Southern Railway cost the Ministry an extra ₹9.25 crore.

But what the CAG picks apart is not only financial mismanagement. Significant delays and inefficiencies in infrastructure development are also laid bare. For instance, Western Railway’s inability to open a track section to goods traffic after completing an expensive gauge conversion has caused a loss of ₹126 crore. This was an important freight movement route, lying idle despite an investment of ₹121 crore.

“These delays are inexcusable and point to a bigger problem of misplaced priorities and lack of project management,” the CAG report says. The report cited procurement malpractices by the Ministry, saying that Chittaranjan Locomotive Works (CLW) procured materials not required and resulted in an avoidable expenditure of ₹6.82 crore.

The most disturbing one could be the point relating to the fact that IRCON International Limited granted a contract worth ₹1,110.80 crore to an ineligible bidder. The standard tender evaluation criteria in this case were bypassed. In this regard, CAG has recommended an in-depth investigation process and called for those responsible to be held to account.

The Ministry of Railways has been under pressure due to dwindling passenger revenues and increased costs, operating one of the world’s most extensive railway networks. This latest audit only heightens the growing apprehension related to sustainability and effectiveness. The Ministry now says, after seeing the report, that it will address the lapses, even though so far it has not yet spelt out any corrective actions.

If the public has been losing faith in the railways, then the findings of this report couldn’t have come at a more inopportune time for the government, which has already been under attack for its general poor state of management with regard to SOE management. Given the frenetic pace towards economic growth that India is engaging in, efficiency and reliability in transport infrastructure will be of paramount importance. Hence, this audit stands out as a scathing reminder of the challenges ahead.