Indian Railways readies cost-cut plan as 8th Pay Commission looms
What's the story
Indian Railways is gearing up to implement strategic cost-cutting measures in maintenance, procurement, and energy sectors. The move comes ahead of a possible increase in wage outgo and arrears after the 8th Pay Commission's recommendations are implemented. The commission was constituted in January this year and is expected to submit its report within 18 months.
Wage increase
7th Pay Commission's impact on railway wages
The 7th Pay Commission, which was implemented in 2016 and will end its decade-long tenure in January 2026, resulted in a wage hike of 14-26% for railway employees. The previous commission added ₹22,000 crore to the wage bill including salaries and pensions. This time around, the amount is expected to be as high as ₹30,000 crore.
Financial planning
Indian Railways' strategy to manage increased wage bill
A senior official from Indian Railways told ET that they have planned for the additional fund requirement. The outgo will be met through internal accruals, a mix of anticipated savings, and higher freight earnings. For fiscal 2025-26, the Railways is targeting an operating ratio (OR) of 98.43% with a net revenue of ₹3,041.31 crore.
Future savings
Indian Railways anticipates savings from electrification and IRFC payouts
The official also revealed that Indian Railways expects to save around ₹5,000 crore annually on its energy bill after the network's electrification is completed. Further, annual payments to the Indian Railway Finance Corporation (IRFC) are likely to reduce in fiscal 2027-28 as capital expenditure has been funded from gross budgetary support (GBS) in recent years.
Revenue expectations
Indian Railways' financial outlook amid wage bill hike
The 7th Pay Commission introduced a fitment factor of 2.57, increasing the minimum basic pay from ₹7,000 to ₹17,990. Central trade unions have demanded a fitment factor of 2.86 this time around, which could increase the national transporter's wage bill by over 22%. Indian Railways has budgeted ₹1.28 lakh crore for staff costs in FY26, up from ₹1.17 lakh crore in FY25, while pension allocations rose to ₹68,602.69 crore from ₹66,358.69 crore.