Railway Minister Suresh Prabhu has requested the Finance Ministry to provide a financial grant of nearly Rs 32,000 crore to reduce the financial burden arising from implementing the 7th Pay Commission recommendations on the public transporter.
While seeking help from the exchequer to implement the salary hike recommendations, Prabhu said in a letter to Finance Minister Arun Jaitley that steps to be taken by the Railways to increase revenue would be able to "absorb" the impact in the next 2-3 years.
"I would therefore earnestly request you to help the Ministry of Railways and handhold it for the implementation of 7th CPC recommendations," the railway minister said in the letter.
"This may be done either through compensation of loss for coaching services (Rs 31,727 crore in 2013-14) or directly by virtue of a revenue grant, matching the amount of the 7th CPC's liability placed upon railways for the next 3-4 years," PTI quoted Prabhu as saying.
However, the minister said an increase in the freight rate in current conditions would have a "deleterious impact" on the domestic economy.
"The first factor of freight earnings, originating loading, is demand-driven, and is largely not within the control of Railways. The second factor, freight rates, though within Railways; competence, has hardly any headroom for increasing it without affecting Railways' competitiveness adversely," he said.
"Moreover, exercising this option will have a deleterious impact on the national economy as well as on critical sectors such as coal, cement, foodgrains," he said.
Railways will need additional fund of about Rs 28,450 crore annually to implement salary hikes to its employees, as per the recommendations of the Pay Commission.
"Our initial assessment, however, is this additional impact will be around Rs 30,031 crore over and above the normal assessed growth of Rs 10,816 crore," said the railway minister.
The Seventh Pay Commission, headed by Justice AK Mathur, had recommended a 16% hike in basic salary and a 63% increase in allowances for government employees, taking the overall hike in salaries to 23.55%.