The Economic Coordination Committee (ECC) of the Cabinet may consider approval of one-time funding for Pakistan Railways aiming to set up a ''Fund'' aimed at taking care of pension liabilities of its retired and retiring employees.
Sources said that a proposal was put up to the meeting of ECC headed by Finance Minister Asad Umar by Ministry of Railways, requesting approval to transfer pension liabilities of Pakistan Railways to the federal government.
However, sources said the ECC wanted the Ministry of Railways to set up a ''Fund'' for this purpose and the federal government will provide initial funding in this regard.
The ECC was told that Pakistan Railways is a self-accounting entity working under the Ministry of Railways and all its accounts are maintained with State Bank of Pakistan (SBP) and income and operational accounts are sent on-monthly basis to Accountant General of Pakistan Revenue (AGPR) for consolidation with the Federal Government Accounts.
Pakistan Railways accounts reflect losses in fiscal year 2017-19 as a result of Rs 26.34 billion spending on salary and Rs 31.68 billion on pension from the total expenditure of Rs 86.20 billion. For meeting the rest of the operational expenses, Pakistan Railways was left with only Rs 28 billion (32.48%). This also reflects that Pakistan Railways expense on account of pension is more than expenditure on salaries. The salary and pension expenditure constituted 63.3% of total expenditure for the year 2017-18.
Pakistan Railways earned Rs 49.58 billion revenue in 2017-18 as opposed to Rs 40.08 billion revenue in the preceding fiscal year of 2016-17. The additional amount of Rs 9.50 billion in the revenue failed to help reduce Pakistan Railways'' deficit in the last fiscal year. The reason was that the expenditure on pension increased to Rs 31.85 billion in 2017-18 from Rs 28.77 billion in 2016-17. Resultantly, 64.24% of the revenue earned during 2017-18 was wiped out by ever-increasing liabilities on account of pensions.
The meeting was further informed that currently, Pakistan Railways is paying pensions to 119,375 pensioners whereas the number of serving employees comes to 76,076 against sanctioned strength of 96,765. The expenditure on account of pension, which right now constitutes 36.96% of total expenditure of Pakistan Railways, distorts the financial statements of the organization, rendering it into a loss-making entity.
Though Pakistan Railways is a public sector enterprise (PSE) working under the Ministry of Railways, it has to adhere to and comply with all the federal government rules and procedures regarding pay, allowances, pension, GP fund and other benefits for serving and retiring employees as admissible to a civil servant issued by Finance Division from time to time.
The federal government has been providing financial support in the form of ''subsidy'' to Pakistan Railways for bridging the deficit. Of Rs 38.40 billion subsidy provided to Pakistan Railways in 2017-18, Rs 31.86 billion (82.97%) were utilized for funding pensions.
The federal government in July 2000 had taken over the pension payments for all categories of expenditure on account of pensions for the employees under Ministry of Defense.
The pensions are still being processed by respective accounting circles but the expenditure on account of defense pensions is adjusted and booked in the civil account. Similarly pensions for Ministry of Foreign Affairs (another self-accounting entity) are also being paid through the AGPR.
The Ministry of Railways also suggested that pension liability on account of pension, pension commutation and gratuity of the retired and retiring employees of Pakistan Railways may also be taken over by the federal government and reflected under the major object ''A04-Employees Retirement Benefits'' as per prescribed procedure for defence pensions.
The subsidy being provided by the federal government from account No. 1 may be withdrawn and pension liabilities may be taken over by the federal government.
The ECC meeting was further told that a detailed procedure for adjustment of Pakistan Railways pension in the account of federal government shall be developed for the purpose of budget allocation, payment, booking of expenditure, and control mechanisms, including internal and external audit in consultation with Ministry of Finance, Office of Controller General of Accounts and the Auditor General of Pakistan.