Social Service Obligations of Indian Railways

Railways is barely able to cover its expenses because of the massive Social Service Obligation imposed by years of populist budgets. Apart from being a commercial organization; in the larger social and national interest, Indian Railways is required to engage in certain uneconomic operations to provide affordable transport facilities to poorer sections of society and to facilitate the movement of essential commodities at below normal costs. The losses incurred by Railways on this particular account are called Indian Railways “Social Service Obligation”.

The latest budget documents reveal that Indian Railways carry Social Service Obligation of more than Rs. 20,000 Crore, which is nearly 16.6% of Gross Traffic Receipts and is almost half of Railways’ Plan Outlay under budgetary sources. The result is that:

• Railways can hardly have adequate resources for its development works.
• Most of money it gets is spent on its running, thus no money for looking beyond running operations. This is shown by the operating ratio which denotes what percentage of money goes into running the Railways. Surplus has decline and there are hardly any resources for development works. There is a rising dependence on budget.
• The Rail budget documents reveal that currently, Railways loses 23 paise per passenger per km.
• In the words of former Railway Minister Gowda, Railways are into the situation of severe funds crunch for many years, which is a result of the ‘decade of golden dilemma’ – the dilemma of choosing between commercial viability and social viability.