8th Pay Commission: Railways to trim costs to accommodate higher wages; maintenance, procurement, energy sectors in focus – The Times of India

Railways is implementing focused cost-cutting initiatives across maintenance, procurement and energy sectors to fortify its financial position before dealing with increased wage expenses anticipated from the Eighth Pay Commission recommendations.Established in January 2024, the Eighth Pay Commission must submit its recommendations within an 18-month timeframe.The previous Seventh Pay Commission led to wage increases of 14-26% for railway staff. Its implementation began in 2016, with tenure concluding in January 2026. The national transporter is currently emphasising expense reduction to enhance operational efficiency over the next two years to prevent financial strain from the forthcoming recommendations.The Seventh Pay Commission increased the wage expenditure by Rs 22,000 crore, including salaries and pensions, whilst the current projection suggests a potential rise of Rs 30,000 crore. “We have planned for the additional fund requirement,” a senior official told Economic Times, stating that internal accruals, combined with projected savings and increased freight revenue, would cover the expenses.Indian Railways recorded an operating ratio (OR) of 98.90% in fiscal 2024-25, resulting in net revenue of Rs 1,341.31 crore. For fiscal 2025-26, the target OR is 98.43% with anticipated net revenue of Rs 3041.31 crore.Officials anticipate annual energy savings of Rs 5,000 crore following network electrification completion.Additionally, yearly payments to Indian Railway Finance Corporation (IRFC) are expected to decrease in fiscal 2027-28, as recent capital expenditure has been funded through gross budgetary support (GBS).Officials confirm no plans for new short-term borrowing. “Annual freight earnings will also rise by Rs 15,000 crore when higher wages need to be paid in 2027-28,” the official stated.The Seventh Pay Commission implemented a 2.57 fitment factor, raising minimum basic pay from Rs 7,000 to Rs 17,990. Central trade unions advocate for a 2.86 fitment factor for the Eighth Pay Commission, potentially increasing the national transporter’s wage bill by over 22%.“Railways will ensure its finances are in a good condition to absorb the hit. Funds would not be an issue,” the official confirmed.The Railways has allocated Rs 1.28 lakh crore for staff costs in 2025-26, increased from Rs 1.17 lakh crore in 2024-25. Additionally, Rs 68,602.69 crore is earmarked for the pension fund in FY26, up from Rs 66,358.69 crore in FY25.