Indian Railways is actively implementing targeted cost-reduction initiatives across its maintenance, procurement, and energy divisions. These measures aim to strengthen the organization’s financial position in anticipation of increased wage liabilities expected from the 8th Pay Commission recommendations.
Established in January 2024, the 8th Pay Commission is required to submit its findings within an 18-month period. The previous Seventh Pay Commission, implemented in 2016 and concluding in January 2026, led to wage hikes ranging between 14% and 26% for railway employees.
Preparing for Wage Expenditure Increase
To mitigate potential financial pressure from the upcoming recommendations, the national transporter is prioritizing expense optimization and operational efficiency over the next two years. The Seventh Pay Commission had raised railway wage expenditure by Rs 22,000 crore, including salaries and pensions, while projections for the 8th Pay Commission indicate a potential increase of Rs 30,000 crore.
A senior official told, “We have planned for the additional fund requirement. Internal accruals, projected savings, and increased freight revenue will adequately cover these expenses.”
Operational Performance and Revenue Targets
Indian Railways recorded an operating ratio (OR) of 98.90% for fiscal 2024-25, generating net revenue of Rs 1,341.31 crore. For the fiscal year 2025-26, the organization has set an OR target of 98.43%, with anticipated net revenue of Rs 3,041.31 crore.
Officials expect annual energy savings of Rs 5,000 crore once network electrification is fully completed. Additionally, payments to the Indian Railway Finance Corporation (IRFC) are projected to decline in fiscal 2027-28, following recent capital expenditure financed through gross budgetary support (GBS).
No New Short-Term Borrowing Planned
Railway authorities have confirmed that there are no plans for new short-term borrowing. The official added, “Annual freight earnings will also rise by Rs 15,000 crore when higher wages are due in 2027-28.”
Impact of Fitment Factor on Staff Costs
The Seventh Pay Commission implemented a 2.57 fitment factor, increasing the minimum basic pay from Rs 7,000 to Rs 17,990. Central trade unions are advocating for a 2.86 fitment factor under the 8th Pay Commission, which could raise the railway’s wage bill by over 22%.
An official emphasized, “Railways will ensure its finances are in a good condition to absorb the impact. Funds would not be an issue.”
Staff Costs and Pension Fund Allocation
For fiscal 2025-26, Indian Railways has allocated Rs 1.28 lakh crore for staff expenses, up from Rs 1.17 lakh crore in 2024-25. The pension fund allocation has also been increased to Rs 68,602.69 crore in FY26 from Rs 66,358.69 crore in FY25, reflecting the organization’s proactive approach to financial planning.
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