The Comptroller and Auditor General of India (CAG) revealed in its report, tabled in Parliament on August 18, 2025, that the Indian Railways understated its working expenditure for the financial year 2022-23 by over ₹5,000 crore. This discrepancy, identified through an audit of fiscal transactions and cross-subsidization records, resulted in a misrepresentation of the Railways’ financial health, showing a reported net profit of ₹2,517.38 crore when the actual result was a net loss of ₹5,257.07 crore. The understated expenditure distorted the Operating Ratio (OR), a key indicator of financial efficiency, raising concerns about transparency and operational management. This article examines the details of the CAG findings, their implications for Indian Railways, and the broader context of infrastructure upgrades, such as those seen in Konkola Copper Mines (KCM), to highlight parallels in addressing operational bottlenecks.
Details of the CAG Findings
The CAG report provides a detailed analysis of the financial discrepancies in Indian Railways’ 2022-23 accounts:
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Understated Expenditure:
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Reported Figures: Railways recorded a total working expenditure of ₹2,37,659.58 crore, with earnings from passenger, coaching, freight, and other services at ₹2,40,176.96 crore, yielding a reported surplus of ₹2,517.38 crore.
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Actual Figures: Cross-subsidization records showed a total expenditure of ₹2,45,393.71 crore against revenue receipts of ₹2,40,136.64 crore, resulting in a net loss of ₹5,257.07 crore. The expenditure was understated by approximately ₹7,734.13 crore.
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Breakdown: Expenditure on goods services was ₹1,11,062.87 crore, and passenger services cost ₹1,34,330.84 crore, with passenger operations incurring a significant loss of ₹60,041.18 crore, partially offset by a ₹54,784 crore profit from freight services.
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Operating Ratio (OR) Misrepresentation:
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Reported OR: Based on the reported surplus, the OR was calculated at 98.10%, indicating that Railways spent ₹98.10 to earn ₹100.
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Actual OR: Accounting for the understated expenditure, the true OR was 101.33%, meaning Railways spent more than it earned, reflecting a poorer ability to generate surplus compared to the Budget Estimates target of 96.98%.
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Implication: The understated expenditure concealed the true financial performance, misleading stakeholders about operational efficiency.
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Cross-Subsidization Issues:
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Revenue Sources: Railways generated ₹74,289.66 crore from passenger operations and ₹1,65,846.98 crore from freight operations, totaling ₹2,40,136.64 crore in revenue receipts.
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Loss Coverage: The profit from freight traffic was used to cross-subsidize passenger service losses, but a ₹5,257.07 crore loss in passenger operations remained uncovered.
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Class-Specific Losses: The largest operational losses came from Sleeper Class (₹17,819.21 crore), Ordinary Class (₹17,076.90 crore), and Second Class (₹16,357.02 crore).
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Overall Expenditure: The Ministry of Railways’ total expenditure in 2022-23 was ₹4,41,642.66 crore, an 11.34% increase from the previous year, comprising ₹2,03,983.08 crore in capital expenditure and ₹2,37,659.58 crore in revenue expenditure, with 72.22% of working expenses allocated to staff costs, pensions, and lease charges.
Operational and Economic Implications
The CAG’s findings have significant implications for Indian Railways and the broader economy:
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Financial Transparency: The understated expenditure undermines trust in Railways’ financial reporting, potentially affecting investor and stakeholder confidence in infrastructure projects.
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Operational Efficiency: The high OR of 101.33% highlights inefficiencies, particularly in passenger services, which rely heavily on freight profits, limiting funds for modernization.
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Economic Impact: With gross traffic receipts increasing 25.51% to ₹2,39,982.56 crore, driven by coal transportation (50.42% of freight earnings), the unaddressed passenger losses strain Railways’ ability to fund critical upgrades.
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Policy Challenges: The report underscores the need for better cost management and revenue diversification, as freight dependency mirrors global trends like KCM’s reliance on rail upgrades to boost copper output.
Comparison with Konkola Copper Mines’ Rail Upgrade
The Indian Railways’ operational bottlenecks share parallels with Konkola Copper Mines’ (KCM) high-speed rail rehabilitation project, launched on July 2, 2025, at its Konkola underground mine in Zambia:
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Infrastructure Bottlenecks: Like KCM’s deteriorated rail tracks causing tramming bottlenecks, Indian Railways faces inefficiencies in passenger services, contributing to financial losses. KCM’s project aims to increase tramming capacity from 850,000 tonnes to 4 million tonnes per annum, addressing similar operational constraints.
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Strategic Investments: KCM’s $700 million investment in rail upgrades mirrors Indian Railways’ need for capital expenditure to modernize infrastructure, as evidenced by its ₹4,41,642.66 crore spending in 2022-23.
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Efficiency Goals: Both aim to enhance efficiency—KCM through faster train speeds and reduced derailments, and Railways through potential reforms to address the high OR and passenger losses.
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Economic Alignment: KCM’s project supports Zambia’s 3 million-tonne copper production goal by 2030, while Indian Railways’ financial health is critical to India’s economic growth, with posts on X noting a record ₹2.40 lakh crore capital outlay for 2023-24.
Challenges
The CAG findings highlight several challenges for Indian Railways:
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Financial Mismanagement: The understated expenditure reflects systemic issues in fiscal accounting, requiring robust auditing and transparency measures.
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Passenger Service Losses: The ₹60,041.18 crore loss in passenger operations, with significant deficits in Sleeper, Ordinary, and Second Classes, necessitates fare rationalization or cost-cutting.
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Freight Dependency: Heavy reliance on freight profits (₹54,784 crore) to offset passenger losses limits reinvestment in infrastructure, as seen in the CAG’s critique of unsanctioned expenditure (₹6,483.71 crore).
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Implementation Risks: Addressing these issues requires aligning with the government’s ₹2.40 lakh crore railway budget for 2023-24, as noted on X, but inefficiencies could delay modernization.
Opportunities
The report also presents opportunities for Indian Railways:
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Revenue Diversification: Reducing dependency on freight by optimizing passenger services, possibly through dynamic pricing, could improve financial health.
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Infrastructure Upgrades: Investments in rail infrastructure, similar to KCM’s rail project, could enhance efficiency, reduce losses, and support India’s logistics goals.
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Policy Reforms: Implementing CAG recommendations, such as accurate expenditure reporting and cost control, can improve the OR and align with the 96.98% budget target.
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Sustainability Focus: Leveraging the 25.51% increase in traffic receipts to fund sustainable technologies, like electrified rail networks, can align Railways with global green trends.
