Report No. 25 of 2013 - Compliance Audit on Railways, Union Government (Railway)

Date on which Report Tabled:
Tue 11 Feb, 2014
Date of sending the report to Government
Government Type
Union Department
Transport & Infrastructure


This Report contains the audit findings of significant nature during the compliance audit in Ministry of Railways (Railway Board) of the Union Government and its field offices for the year ended 31 March 2012. The Report contains five chapters. Chapter 1 gives a brief introduction of the audited entities; recoveries made by Ministry/ Department at the instance of Audit; remedial actions taken in response to audit observations made in earlier Reports; summarized position of Action Taken Notes. Chapters 2 to 5 present detailed findings/observations under the relevant department title.

As per rules, freight charges are to be recovered by the shortest route even though it is operationally feasible to carry freight only by the longer route.This resulted in not only loss of revenue but also incurring of extra operational cost. To reduce these losses, Railway Board directed (February 1976) Zonal Railways to take action to overcome the existing difficulties in not being able to carry traffic by the shorter route. It has also been directing Zonal Railways from time to time to forward proposals for rationalization of longer routes with proper justification. Audit, however, observed in August 2012 that Zonal Railways had taken limited action to rationalize the longer routes. Further, to remove bottlenecks that deterred the movement of traffic by shorter route,action was frequently delayed or not taken. As a result, Railways are sustaining recurring losses on account of carriage of freight by the longer route and charging of freight by the shorter route. In a test check, Audit has assessed a loss of Rs.422.74 crore over the period 2010-12 due to carrying of freight traffic by the longer route.

This para highlights the revenue losses due to failure of Railway Board in preventing the misuse of the dual pricing system introduced in May/ July 2008 for transportation of iron ore. The freight rate fixed for transporting iron ore for non domestic consumption was more than three times the rate fixed for domestic consumption. To avail the domestic rate the Railways had prescribed mandatory submission of certain prescribed documents. The internal control system of the Railways failed as it allowed the concerned parties to avail the domestic rate without submitting some of the essential prescribed documents.A test check by Audit during the period May 2008 to March 2012 revealed a revenue loss of Rs.2486.68 crore besides a penalty of Rs.13869.86 crore which is due for recovery. Recovery of Rs.1670.57 crore was also due from Kudremukh Iron Ore Company Limited, Mangalore in case of iron pellets exported. This was in addition to the revenue loss of Rs.1795.51 crore pointed out by Audit in the C&AG Audit Report No.32 of 2011-12. So far, Railway Administration (South Eastern Railway) have acknowledged a freight evasion of Rs.1875.63 crore in 15 cases.

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