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Indian Railways rationalises freight fares
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Recently, the Indian Railways announced rationalisation of freight fares. This rationalisation will result in an 8.75% increase in freight rates for major commodities such as coal, iron and steel, iron ore, and raw materials for steel plants. The freight rates were rationalised to ensure additional revenue generation across the network. An additional revenue of Rs 3,344 crore is expected from such rationalisation, which will be utilised to improve passenger amenities. In addition, the haulage charge of containers has been increased by 5% and the freight rates of other small goods have been increased by 8.75%. Freight rates have not been increased for goods such as food grains, flours, pulses, fertilisers, salt, and sugar, cement, petroleum, and diesel. In light of this, we discuss some issues around Railways’ freight pricing.
Railways’ sources of internal revenue
Railways earns its internal revenue primarily from passenger and freight traffic. In 2016-17 (latest actual figures available), freight and passenger traffic contributed to about 63% and 28% of the internal revenue, respectively. The remaining is earned from miscellaneous sources such as parcel service, coaching receipts, and platform tickets.
Freight traffic: Railways majorly transports bulk freight, and the freight basket has mostly been limited to include raw materials for certain industries such as power plants, and iron and steel plants. It generates most of its freight revenue from the transportation of coal (43%), followed by cement (8%), food-grains (7%), and iron and steel (7%). In 2018-19, Railways expects to earn Rs 1,21,950 crore from its freight traffic.
Passenger traffic: Passenger traffic is broadly divided into two categories: suburban and non-suburban traffic. Suburban trains are passenger trains that cover short distances of up to 150 km, and help move passengers within cities and suburbs. Majority of the passenger revenue (94% in 2017-18) comes from the non-suburban traffic (or the long-distance trains).
Within non-suburban traffic, second class (includes sleeper class) contributes to 67% of the non-suburban revenue. AC class (includes AC 3-tier, AC Chair Car and AC sleeper) contributes to 32% of the non-suburban revenue. The remaining 1% comes from AC First Class (includes Executive class and First Class).
Railways’ ability to generate its own revenue has been slowing
The growth rate of Railways’ earnings from its core business of running freight and passenger trains has been declining. This is due to a decline in the growth of both freight and passenger traffic. Some of the reasons for such decline include:
Freight traffic growth has been declining, and is limited to a few items
Growth of freight traffic has been declining over the last few years. It has declined from around 8% in the mid-2000s to a 4% negative growth in mid-2010s, before an estimated recovery to about 5% now.
The National Transport Development Policy Committee (2014) had noted various issues with freight transportation on railways. For example, Indian Railways does not have an institutional arrangement to attract and aggregate traffic of smaller parcel size. Further, freight services are run with a focus on efficiency instead of customer satisfaction. Consequently, it has not been able to capture high potential markets such as FMCGs, hazardous materials, or automobiles and containerised cargo. Most of such freight is transported by roads.
The freight basket is also limited to a few commodities, most of which are bulk in nature. For example, coal contributes to about 43% of freight revenue and 25% of the total internal revenue. Therefore, any shift in transport patterns of any of these bulk commodities could affect Railways’ finances significantly.
For example, if new coal based power plants are set up at pit heads (source of coal), then the need for transporting coal through Railways would decrease. If India’s coal usage decreases due to a shift to more non-renewable sources of energy, it will reduce the amount of coal being transported. Such situations could have a significant adverse impact on Railways’ revenue.
Freight traffic cross-subsidises passenger traffic
In 2014-15, while Railways’ freight business made a profit of about Rs 44,500 crore, its passenger business incurred a net loss of about Rs 33,000 crore.17 The total passenger revenue during this period was Rs 49,000 crore. This implies that losses in the passenger business are about 67% of its revenue. Therefore, in 2014-15, for every one rupee earned in its passenger business, Indian Railways ended up spending Rs 1.67.
These losses occur across both suburban and non-suburban operations, and are primarily caused due to: (i) passenger fares being lower than the costs, and (ii) concessions to various categories of passengers. According to the NITI Aayog (2016), about 77% to 80% of these losses are contributed by non-suburban operations (long-distance trains). Concessions to various categories of passengers contribute to about 4% of these losses, and the remaining (73-76%) is due to fares being lower than the system costs.
The NITI Aayog (2016) had noted that Railways ends up using profits from its freight business to provide for such losses in the passenger segment, and also to manage its overall financial situation. Such cross-subsidisation has resulted in high freight tariffs. The NTDPC (2014) had noted that, in several countries, passenger fares are either higher or almost equal as freight rates. However, in India, the ratio of passenger fare to freight rate is about 0.3.
Impact of increasing freight rates
The recent freight rationalisation further increases the freight rates for certain key commodities by 8.75%, with an intention to improve passenger amenities. Higher freight tariffs could be counter-productive towards growth of traffic in the segment. The NTDPC report had noted that due to such high tariffs, freight traffic has been moving to other modes of transport. Further, the higher cost of freight segment is eventually passed on to the common public in the form of increased costs of electricity, steel, etc. Various experts have recommended that Railways should consider ways to rationalise freight and passenger tariff distortions in a way to reduce such cross-subsidisation.
For a detailed analysis of Railways revenue and infrastructure, refer to our report on ‘State of Indian Railways’.
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The Minister of Home Affairs introduced the Citizenship (Amendment) Bill, 2019 today in Lok Sabha. It is scheduled to be taken up for discussion and passing by the House later today. The Bill amends the Citizenship Act, 1955, and seeks to make foreign illegal migrants of certain religious communities coming from Afghanistan, Bangladesh, and Pakistan eligible for Indian citizenship. In this blog, we look at the criteria for determining citizenship in India, discuss how the Bill proposes to change the criteria, and highlight other key changes proposed by the Bill.
How is citizenship acquired in India?
In India, citizenship is regulated by the Citizenship Act, 1955. The Act specifies that citizenship may be acquired in India through five methods – by birth in India, by descent, through registration, by naturalisation (extended residence in India), and by incorporation of territory into India. [1]
Can illegal migrants acquire citizenship?
An illegal migrant is prohibited from acquiring Indian citizenship. An illegal immigrant is a foreigner who either enters India illegally, i.e., without valid travel documents, like a visa and passport, or enters India legally, but stays beyond the time period permitted in their travel documents. An illegal migrant can be prosecuted in India, and deported or imprisoned.
In September 2015 and July 2016, the central government exempted certain groups of illegal migrants from being imprisoned or deported. [2] These are illegal migrants who came into India from Afghanistan, Bangladesh, or Pakistan on or before December 31, 2014, and belong to the Hindu, Sikh, Buddhist, Jain, Parsi, or Christian religious communities.
How does the Bill seek to change the criteria for determining citizenship?
The Bill proposes that the specified class of illegal migrants from the three countries will not be treated as illegal migrants, making them eligible for citizenship. On acquiring citizenship, such migrants shall be deemed to be Indian citizens from the date of their entry into India and all legal proceedings regarding their status as illegal migrants or their citizenship will be closed.
The Act allows a person to apply for citizenship by naturalisation, if the person meets certain qualifications. One of the qualifications is that the person must have resided in India or been in central government service for the last 12 months and at least 11 years of the preceding 14 years. For the specified class of illegal migrants, the number of years of residency has been relaxed from 11 years to five years.
Are the provisions of the Bill applicable across the country?
The Bill clarifies that the proposed amendments on citizenship to the specified class of illegal migrants will not apply to certain areas. These are: (i) the tribal areas of Assam, Meghalaya, Mizoram, and Tripura, as included in the Sixth Schedule to the Constitution, and (ii) the states regulated by the “Inner Line” permit under the Bengal Eastern Frontier Regulations 1873. These Sixth Schedule tribal areas include Karbi Anglong (in Assam), Garo Hills (in Meghalaya), Chakma District (in Mizoram), and Tripura Tribal Areas District. Further, the Inner Line Permit regulates visit of all persons, including Indian citizens, to Arunachal Pradesh, Mizoram, and Nagaland.
Is the differentiation among the specified class of illegal migrants and all other illegal migrants reasonable?
The Bill makes only certain illegal migrants eligible for citizenship. These are persons belonging to the six specified religious communities, from the three specified countries, who entered India on or before December 31, 2014, and do not reside in the Sixth Schedule areas or in the states regulated by the Inner Line Permit states. This implies that all other illegal migrants will not be able to claim the benefit of citizenship conferred by the Bill, and may continue to be prosecuted as illegal migrants. Any provision which distinguishes between two groups may violate the standard of equality guaranteed under Article 14 of the Constitution, unless one can show a reasonable rationale for doing so. [3] The Bill provides differential treatment to illegal migrants on the basis of (a) their country of origin, (b) religion, (c) date of entry into India, and (d) place of residence in India. The question is whether these factors serve a reasonable purpose to justify the differential treatment. We examine this below.
The Bill classifies migrants based on their country of origin to include only Afghanistan, Pakistan and Bangladesh. While the Statement of Objects and Reasons (SoR) in the Bill reasons that millions of citizens of undivided India were living in Pakistan and Bangladesh, no reason has been provided to explain the inclusion of Afghanistan. The SoR also states that these countries have a state religion, which has resulted in religious persecution of minority groups. However, there are other countries which may fit this qualification. For instance, two of India’s neighboring countries, Sri Lanka (Buddhist state religion) [4] and Myanmar (primacy to Buddhism) [5], have had a history of persecution of Tamil Eelams (a linguistic minority in Sri Lanka), and the Rohingya Muslims, respectively. [6], [7], [8]
Further, there are other religious minorities from Pakistan, Afghanistan and Bangladesh, such as the Ahmadiyya Muslims in Pakistan (considered non-Muslims in that country) [9], and atheists in Bangladesh [10] who have faced religious persecution and may have illegally migrated to India. Given that the objective of the Bill is to provide citizenship to migrants escaping from religious persecution, it is not clear why illegal migrants belonging to other neighbouring countries, or belonging to religious minorities from these three specified countries, have been excluded from the Bill.
The Bill also creates further differentiation between the specified class of illegal migrants based on when they entered India (before or after December 31, 2014), and where they live in India (provisions not applicable to Sixth Schedule and Inner Line Permit areas). However, the reasons provided to explain the distinction is unclear. Note that certain restrictions apply to persons (both citizens and foreigners) in the Sixth Schedule areas and in the states regulated by the Inner Line Permit. Once an illegal migrant residing in these areas acquires citizenship, he would be subject to the same restrictions in these areas, as are applicable to other Indian citizens. Therefore, it is unclear why the Bill excludes illegal migrants residing in these areas.
How does the Bill change the regulations for Overseas Citizens of India?
The Bill also amends the provisions on registration of Overseas Citizens of India (OCI). OCI cardholders are foreigners who are persons of Indian origin. For example, they may have been former Indian citizens, or children of current Indian citizens. An OCI enjoys benefits such as the right to travel to India without a visa, or to work and study here. At present, the government may cancel a person’s OCI registration on various grounds specified in the Act. In case of a cancellation, an OCI residing in India may be required to leave the country. The Bill adds another ground for cancelling OCI registration — violation of any law notified by the central government. However, the Bill does not provide any guidance on the nature of laws which the central government may notify. The Supreme Court has noted that this guidance is necessary to set limits on the authority’s powers and to avoid any arbitrariness in exercise of powers. [11] Therefore, the powers given to the government under the Bill may go beyond the permissible limits of valid delegation.
Note: The blog has been updated to remove the following issue: “Second, the Bill delegates the power to notify laws and not offences. This may result in the cancellation of OCI for minor violations. For instance, the government may want to cancel the registration of an OCI who is found guilty of sedition, under the Indian Penal Code, 1861. However, since the government cannot notify one offence, it will need to notify the entire Indian Penal Code, which would include minor offences such as rash and negligent driving.”
[1]. Section 2(1)(b) of the Citizenship Act, 1955.
[2]. State of West Bengal vs Anwar Ali Sarkar, AIR 1952 SC 75.
[3]. State of West Bengal vs Anwar Ali Sarkar, AIR 1952 SC 75.
[4]. Article 9 of the Constitution of the Democratic Socialist Republic of Sri Lanka states: “The Republic of Sri Lanka shall give to Buddhism the foremost place and accordingly it shall be the duty of the State to protect and foster the Buddha Sasana, while assuring to all religions the rights granted by Articles 10 and 14(1)(e).”
[5]. Articles 361 and 362 of the Constitution of the Republic of the Union of Myanmar state the following. “361. The Union recognizes special position of Buddhism as the faith professed by the great majority of the citizens of the Union. 362. The Union also recognizes Christianity, Islam, Hinduism and Animism as the religions existing in the Union at the day of the coming into operation of this Constitution.”
[6]. It is estimated that there are over a lakh Sri Lankan refugees in India, two-thirds of them in government camps. See https://timesofindia.indiatimes.com/city/chennai/why-lankan-refugees-are-reluctant-to-go-back-home/articleshow/65591130.cms
[7]. “Myanmar Rohingya: What you need to know about the crisis”, BBC News, April 24, 2018, https://www.bbc.com/news/world-asia-41566561.
[8]. “Why India is refusing refuge to Rohingyas”, Times of India, September 6, 2017, https://timesofindia.indiatimes.com/india/why-india-is-refusing-refuge-to-rohingyas/articleshow/60386974.cms.
[9]. The Second Amendment to the Constitution of Pakistan passed in 1974 effectively declared Ahmaddiyas as non-Muslims.
[10]. For example, see https://www.theguardian.com/world/2016/jun/11/bangladesh-murders-bloggers-foreigners-religion.
[11]. Hamdard Dawakhana and Anr., v. The Union of India (UOI) and Ors., AIR1960SC554; Confederation of Indian Alcoholic Beverage Companies and Ors. vs. The State of Bihar and Ors., 2016(4) PLJR369.
The Arms (Amendment) Bill, 2019 was introduced in Lok Sabha recently and is scheduled to be passed in this Winter Session. The Bill amends the Arms Act, 1959 which deals with the regulation of arms in India. The Act defines arms to include firearms, swords, and anti-aircraft missiles. The Statement of Objects and Reasons of the Bill noted that law enforcement agencies have indicated a growing connection between the possession of illegal firearms and criminal activities. In this context, the Bill seeks to reduce the number of firearms allowed per person, and increases punishments for certain offences under the Act. The Bill also introduces new categories of offences. In this post, we explain key provisions of the Bill.
How many firearms are allowed per person?
The Arms Act, 1959 allows a person to have three licenced firearms. The Bill proposes to reduce this to one firearm per person. This would also include any firearms that may have been given as inheritance or as an heirloom. Excess firearms must be deposited at the nearest police station or licensed arms dealer within one year of the passing of the Bill. The Bill also extends the duration of a licence from three years to five years.
Note that in 2017, 63,219 firearms were seized from across India under the Arms Act, 1959. Out of these, only 3,525 (5.5%) were licenced firearms. Further, 36,292 cases involving firearms were registered under the Act in 2017, of which only 419 (1.1%) cases involved licenced firearms. [1] This trend persisted even at the level of specific crimes, where only 8.5% of the murders committed using firearms involved licenced firearms. [2]
What changes are being made to existing offences?
Presently, the Act bans manufacture, sale, use, transfer, conversion, testing or proofing of firearms without license. The Bill additionally prohibits obtaining or procuring un-licensed firearms, and the conversion of one category of firearms to another without a license. The latter includes any modifications done to enhance the performance of a firearm.
The Bill also proposes increased punishments for several existing offences. For example, the Act specifies the punishment for: (i) dealing in un-licensed firearms, including their manufacture, procurement, sale, transfer, conversion, (ii) the shortening or conversion of a firearm without a licence, and (iii) import or export of banned firearms. The punishment for these offences currently is between three years and seven years, along with a fine. The Bill increases the minimum punishment to seven years and the maximum to life imprisonment.
The Act also punishes dealing in prohibited firearms (such as automatic and semi-automatic assault rifles) without a license, with imprisonment between seven years and life imprisonment, along with fine. The Bill increases the minimum punishment from seven years to 10 years. Additionally, the punishment for cases in which the usage of prohibited arms results in the death of a person has been revised. The punishment has been updated from the existing punishment of death penalty to allow for death penalty or life imprisonment, along with a fine.
Are there any new offences being introduced?
The Bill adds certain news offences. For example, forcefully taking a firearm from police or armed forces has been made a crime under the Bill. The punishment for doing so is imprisonment between 10 years and life imprisonment, along with a fine. Additionally, the Bill punishes the negligent use of firearms, such as celebratory gunfire during weddings or religious ceremonies which endanger human life or personal safety of others. The proposed punishment in this case is imprisonment of up to two years, or a fine of up to one lakh rupees, or both.
The Bill also adds a definition of ‘illicit trafficking’. It is defined to include the trade, acquisition, sale of firearms or ammunitions into or out of India where the firearms are either not marked as per the Act or violate the provisions of the Act. The Bill makes illicit trafficking punishable with imprisonment between 10 years and life, along with a fine.
Does the Bill address issues of organised crime?
The Bill also introduces a definition of ‘organised crime’. ‘Organised crime’ has been defined as continued unlawful activity by a person, either as a member of a syndicate or on its behalf, by using unlawful means, such as violence or coercion, to gain economic or other benefits. An organised crime syndicate refers to two or more persons committing organised crime.
The Bill introduces harsher punishments for members of an organised crime syndicate. For example, for the possession of an unlicensed firearm, the minimum term for an individual would be seven years, extendable to life imprisonment and liable to a fine. However, the possession of unlicensed firearms by a member of a syndicate will be punishable with imprisonment between 10 years and life, along with a fine. This increased punishment also applies to non-members contravening provisions of the Act on behalf of a syndicate.
[1] Crime in India 2017, National Crime Records Bureau, October 21, 2019, http://ncrb.gov.in/StatPublications/CII/CII2017/pdfs/CII2017-Full.pdf.
[2] Crime in India 2016, National Crime Records Bureau, October 10, 2017, http://ncrb.gov.in/StatPublications/CII/CII2016/pdfs/NEWPDFs/Crime%20in%20India%20-%202016%20Complete%20PDF%20291117.pdf.