Indian Railways is proactively planning to implement cost-cutting measures across maintenance, procurement and energy sectors to strengthen its financial position ahead of the anticipated wage hike following the Eighth Pay Commission recommendations.
The Eighth Pay Commission, established in January 2025, is tasked with submitting its recommendations within 18 months. The previous Seventh Pay Commission had led to salary increases of 14-26% for railway employees, implemented in 2016, and concluded in January 2026. Its implementation had increased the wage expenditure by ₹22,000 crore, including salaries and pensions. Current projections suggest the Eighth Pay Commission could push the wage bill up by around ₹30,000 crore.
Internal accruals, projected savings from cost-cut initiatives, and increased freight revenue are expected to cover the forthcoming wage expenses.
Indian Railways recorded an operating ratio (OR) of 98.90% in FY 2024-25, generating a net revenue of ₹1,341.31 crore. For FY 2025-26, the target OR is 98.43%, with projected net revenue of ₹3,041.31 crore. Officials also anticipate annual energy savings of ₹5,000 crore once network electrification is completed.
In addition, payments to the Indian Railway Finance Corporation (IRFC) are expected to decline in FY 2027-28, as recent capital expenditure has been funded through Gross Budgetary Support (GBS). There are currently no plans for new short-term borrowings. Economic Times cited a Railway official as saying that annual freight earnings are projected to rise by ₹15,000 crore, which will help offset higher wage payouts in 2027-28.
Under the Seventh Pay Commission, a fitment factor of 2.57 had increased minimum basic pay from ₹7,000 to ₹17,990. Central trade unions are advocating a 2.86 fitment factor for the Eighth Pay Commission, which could increase the national transporter's wage bill by more than 22%.
For FY 2025-26, Indian Railways has allocated ₹1.28 lakh crore for staff costs, up from ₹1.17 lakh crore in FY 2024-25. The pension fund allocation has also increased to ₹68,602.69 crore, compared with ₹66,358.69 crore in FY 2024-25.
By focusing on efficiency, cost optimisation and revenue growth, Indian Railways aims to maintain financial stability while preparing for the impending pay revisions recommended by the Eighth Pay Commission.