Indian Railways mulls panel to improve PSU coordination after CAG flags Rs 2,604-crore loss

Indian Railways

The Indian Railways is considering setting up a panel comprising current and former Indian Railway Personnel Service officers (IRPS) to improve coordination between its public sector undertakings (PSUs) and avoid miscommunication amongst them, multiple officials aware of the ongoing discussions said.

"There have been a few instances of miscommunication between railway PSUs which led to a significant loss in the last financial year. In order to avoid such a situation the ministry is looking to set up a panel for better coordination," a senior government official said.

He said the proposed panel will not only help improve internal coordination between the railway PSUs but will also help the Indian Railways coordinate with other ministries to enhance speedy approvals and decision making.

The proposal to create a panel to improve coordination between railway PSUs comes after the Comptroller and Auditor General of India (CAG) flagged financial losses to the Indian Railways of Rs 2604.40 crore in 33 case studies of non-recovery of loans and GST, improper decision to generate non-fare revenues, ineligible grant of concession, and unfruitful expenditures.

According to the CAG, the instances mentioned in its report are those which came to notice in the test audit for the period 2021-22 as well as those which came to notice in earlier years but could not be reported in the previous Audit Reports.

Another government official said that a proposal has been presented before the Railway Board to approve the creation of such a panel at an estimated annual cost of Rs 2-5 crore comprising mostly of retired IRPS from different departments.

"The proposal to create a panel of retired heads of railways PSUs and former railway board members along with two current senior railway officials was presented to the board in September," the second official said.

He added that if the Railway Board approves the proposal the panel will be created in a couple of months as most members of the proposed panel have already been approached by the ministry.

CAG flags financial loss

In August, CAG’s compliance audit report mentioned that the railway ministry in March 2018 gave permission for a Memorandum of Understanding (MoU) between Rail Land Development Authority (RLDA) and IRCON and get lease premium upfront by transferring the development of land lease rights to the PSUs for generation of no-fare revenue for 2017-18.

Subsequently, a tripartite MoU was signed by the railway ministry, IRCON and RLDA on March 26, 2018, for the transfer of leasehold rights of the land parcel.

IRCON agreed to provide the upfront lease premium of Rs 2,700 crore to Rs 3,200 crore in lieu of being provided the transfer of leasehold rights for the project site and rights to undertake commercial development of the property by appointing a developer. The repayment of principal and interest was to be borne by the ministry.

As per the report, RLDA and IRCON signed the 99 years’ lease agreement on March 28, 2018. However, the agreement was repudiated through a supplementary agreement on the same day stating that in view of the ongoing mutual discussion and that since the parties were examining the issue, 'the grant of lease site is presently not required to be undertaken'.

IRCON went ahead and borrowed Rs 3,200 crore from Indian Railway Finance Corporation (IRFC) at an 8.77 percent interest rate and paid Rs 2,580.6 crore to RLDA on March 31, 2018. As per the terms of the MoU, Railways paid the entire principal amount of Rs 3,200 crore along with interest of Rs 835 crore.

The CAG in its audit found that the IRCON borrowed from IRFC despite the lease agreement being terminated.

"Thus the Ministry of Railways received a lease premium for a parcel of land which was not on lease. While this was credited as non-fare revenue in FY 2017-18, it created a huge liability for repayment and finally Indian Railways paid interest of Rs 834.72 crore," the report said.

In another case, the CAG found that the Railways did not levy charges for the shunting activity of engines resulting in a loss of revenue of Rs 149.12 crore from 2018 to 2022 in East Coast Railway.

"Bills for shunting charges may be preferred as required vide Ministry of Railway's Circular of February 2009 for utilisation of Railways' engine(s) for shunting activity in siding premises. Responsibility may also be fixed for the lapse resulting in loss of revenue to Railways," the CAG report recommended.