8th Pay Commission: Railways preparing for ‘cost cutting’ before increasing salaries and pensions!

The Eighth Pay Commission has been constituted, and it is estimated that it will increase the annual burden on the central government’s finances by ₹3.9 lakh crore for the salaries and pensions of approximately 50 lakh government employees and 69 lakh pensioners. In light of this, Indian Railways is also preparing to strengthen its financial position to absorb the increased salary costs. According to reports, the Railways has initiated measures to cut costs in various areas such as maintenance, procurement, and energy. NDTV Profit, citing a report, stated that the Railways has begun preparing for the increased salary burden by reducing expenses and improving operational efficiency.

Following the constitution of the 8th Pay Commission, the salaries, allowances, and pensions of central government employees are to be reviewed, and its recommendations are expected to be implemented from January 1, 2026. This commission will cover approximately 1.19 crore employees (including defense personnel) and pensioners. The commission is chaired by former Supreme Court judge Ranjana Prakash Desai. It is expected to submit its report within 18 months.

Railways Aims to Increase Net Income
In FY2025, the Railways’ operating ratio was 98.90%, leaving a meager net revenue of only ₹1,341.31 crore. For FY2026, the Railways aims to improve its operating ratio to 98.42% and achieve a net revenue of up to ₹3,041.31 crore. Officials stated that their entire focus is on ensuring that when the new salary structure is implemented, the organization’s financial position is strong enough to easily absorb the increased salary burden.

Future Plans and Supporting Factors
According to the report, officials highlighted a significant factor: a reduction in annual payments to the Indian Railway Finance Corporation (IRFC) is expected in FY2028. This is because recent capital expenditures are now being financed more through budgetary support rather than borrowing.

• Railway officials also confirmed that there are no plans to take on short-term debt in the near future. Additionally, freight earnings are expected to increase significantly over the next few years.
• One official stated that by the time the railways have to implement the increased salaries under the 8th Pay Commission, annual freight earnings could increase by approximately ₹15,000 crore by FY2028, further strengthening the railways’ financial position.

Employee unions are confident that the 8th Pay Commission will be implemented on schedule. Shiv Gopal Mishra, General Secretary of the All India Railwaymen’s Federation, expressed hope that the pay hike would be effective from January 1, 2026.