The Comptroller and Auditor General (CAG) of India hasn’t agreed to this change. In its 2005-06 report, its latest, CAG said, “The charging of the capital component to revenue was not in order.” Further, CAG noted, “Railways needed to appropriate funds to the Capital Fund, from which the capital portion of the lease charges are finally paid, from the surplus available with them.” According to the report, the Railways is now considering doing that.

Interest on IR fund balances (Rs 660.85 crore): The Finance Ministry pays interest on the closing balance of various IR funds (Depreciation Reserve Fund, Pension Fund, Development Fund and Capital Fund). Earlier, this interest was adjusted to IR funds through the year-end proforma adjustment with the Finance Ministry.

From 2006-07, IR decided to first credit the interest income accruing on its fund balances to ‘miscellaneous receipts’ and subsequently debit an equal amount to the same funds. CAG hasn’t agreed to this change either. “If the interest amount is received under miscellaneous receipts, the surplus would be enhanced artificially,” says a CAG letter to IR.

Losses on strategic lines (Rs 309 crore): The Centre compensates IR for the losses it incurs on strategic lines. Previously, IR used to deduct the compensatory grant from the annual dividend payable by it to the government. However, from 2006-07, IR decided to deduct the compensatory grant from its working expenditure, saying that “the reimbursement of losses should rightly go for reducing the excess expenditure”.

Simultaneously, it didn’t make any deductions from the dividend payable. The Railway Convention Committee, in its latest report, has recommended that IR get CAG’s views; CAG is yet to approve this change.

... contd.