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’.
As of April 26, Rajasthan has 2,083 confirmed cases of COVID-19 (fifth highest in the country), of which 493 have recovered and 33 have died. On March 18, the Rajasthan government had declared a state-wide curfew till March 31, to check the spread of the disease. A nation-wide lockdown has also been in place since March 25 and is currently, extended up to May 3. The state has announced several policy decisions to prevent the spread of the virus and provide relief for those affected by it. This blog summarises the key policy measures taken by the Government of Rajasthan in response to the COVID-19 pandemic.
Early measures for containment
Between late January and early February, Rajasthan Government’s measures were aimed towards identification, screening and testing, and constant monitoring of passenger arrivals from China. Instructions were also issued to district health officials for various prevention, treatment, & control related activities, such as (i) mandatory 28-day home isolation for all travellers from China, (ii) running awareness campaigns, and (iii) ensuring adequate supplies of Personal Protection Equipments (PPEs). Some of the other measures, taken prior to the state-wide lockdown, are summarised below:
Administrative measures
The government announced the formation of Rapid Response Teams (RRTs), at the medical college-level and at district-level on March 3 and 5, respectively.
The District Collector was appointed as the Nodal Officer for all COVID-19 containment activities. Control Rooms were to be opened at all Sub-divisional offices. The concerned officers were also directed to strengthen information dissemination mechanisms and tackle the menace of fake news.
Directives were issued on March 11 to rural health workers/officials to report for duty on Gazetted holidays. Further, government departments were shut down between March 22 and March 31. Only essential departments such as Health Services were allowed to function on a rotation basis at 50% capacity and special / emergency leaves were permitted.
Travel and Movement
Air travellers were to undergo 14-day home isolation and were also required to provide an undertaking for the same. Besides, those violating the mandated isolation/quarantine were liable to be punished under Section. 188 of the Indian Penal Code. Penalties are imposed under this section on persons for the willful violation of orders that have been duly passed by a public servant.
All institutions and establishments, such as (i) educational institutions, theatres, and gyms, (ii) anganwadis, (iii) bars, discos, libraries, restaurants etc, (iv) museums and tourist places, were directed to be shut down till March 31.
The daily Jan Sunwai at the Chief Minister’s residence was cancelled until further notice. Various government offices were directed to shut down and exams of schools and colleges were postponed.
On March 24, the government issued a state-wide ban on the movement of private vehicles till March 31.
Health Measures
Advisories regarding prevention and control measures were issued to: (i) District Collectors, regarding sample collection and transportation, hotels, and preparedness of hospitals, (ii) Police department, to stop using breath analysers, (iii) Private hospitals, regarding preparedness and monitoring activities, and (iv) Temple trusts, to disinfect their premises with chemicals.
The government issued Standard Operating Procedures for conducting mock drills in emergency response handling of COVID-19 cases. Training and capacity building measures were also initiated for (i) Railways, Army personnel etc and (ii) ASHA workers, through video conferencing.
A model micro-plan for containing local transmission of COVID was released. Key features of the plan include: (i) identification and mapping of affected areas, (ii) activities for prevention control, surveillance, and contact tracing, (iii) human resource management, including roles and responsibilities, (iv) various infrastructural and logistical support, such as hospitals, labs etc, and (v) communication and data management.
Resource Management: Private hospitals and medical colleges were instructed to reserve 25 % of beds for COVID-19 patients. They were also instructed to utilise faculty from the departments of Preventive and Social Medicine to conduct health education and awareness activities.
Over 6000 Students of nursing schools were employed in assisting the health department to conduct screening activities being conducted at public places, railways stations, bus stands etc.
Further, the government issued guidelines to ensure the rational use of PPEs.
Welfare Measures
The government announced financial assistance, in the form of encouragement grants, to health professionals engaged in treating COVID-19 patients.
Steps were also taken by the government to ensure speedy disbursal of pensions for February and March.
The government also initiated the replacement of the biometric authentication with an OTP process for distribution of ration via the Public Distribution System (PDS).
During the lockdown
State-wide curfew announced on March 18 has been followed by a nation-wide lockdown between March 25 and May 3. However, certain relaxations have been recommended by the state government from April 21 onwards. Some of the key measures undertaken during the lockdown period are:
Administrative Measures
Advisory groups and task forces were set up on – (i) COVID-19 prevention, (ii) Health and Economy, and (iii) Higher education. These groups will provide advice on the way forward for (i) prevention and containment activities, (ii) post-lockdown strategies and strategies to revive the economy, and (iii) to address the challenges facing the higher education sector respectively.
Services of retiring medical and paramedical professionals retiring between March and August have been extended till September 2020.
Essential Goods and Services
A Drug Supply Control Room was set up at the Rajasthan Pharmacy Council. This is to ensure uninterrupted supply of medicines during the lockdown and will also assist in facilitating home delivery of medicines.
The government permitted Fair Price Shops to sell products such as masalas, sanitisers, and hygiene products, in addition to food grains.
Village service cooperatives were declared as secondary markets to facilitate farmers to sell their produce near their own fields/villages during the lockdown.
A Whatsapp helpline was also set up for complaints regarding hoarding, black marketing, and overpricing.
Travel and Movement
Once lockdown was in place, the government issued instructions to identify, screen, and categorise people from other states who have travelled to Rajasthan. They were to be categorised into: (i) people displaying symptoms to be put in isolation wards, (ii) people over 60 years of age with symptoms and co-morbidities to be put in quarantine centres, and (iii) asymptomatic people to be home quarantined.
On March 28, the government announced the availability of buses to transport people during the lockdown. Further, stranded students in Kota were allowed to return to their respective states.
On April 2, a portal and a helpline were launched to help stranded foreign tourists and NRIs.
On April 11, an e-pass facility was launched for movement of people and vehicles.
Health Measures
To identify COVID-19 patients, district officials were instructed to monitor people with ARI/URI/Pneumonia or other breathing difficulties coming into hospital OPDs. Pharmacists were also instructed to not issue medicines for cold/cough without prescriptions.
A mobile app – Raj COVID Info – was developed by the government for tracking of quarantined people. Quarantined persons are required to send their selfie clicks at regular intervals, failing which a notification would be sent by the app. The app also provides a lot of information on COVID-19, such as the number of cases, and press releases by the government.
Due to the lockdown, people had restricted access to hospitals and treatment. Thus, instructions were issued to utilise Mobile Medical Vans for treatment/screening and also as mobile OPDs.
On April 20, a detailed action plan for prevention and control of COVID-19 was released. The report recommended: (i) preparation of a containment plan, (ii) formation of RRTs, (iii) testing protocols, (iv) setting up of control room and helpline, (v) designated quarantine centres and COVID-19 hospitals, (vi) roles and responsibilities, and (vii) other logistics.
Welfare Measures
The government issued instructions to make medicines available free of cost to senior citizens and other patients with chronic illnesses through the Chief Minister’s Free Medicine Scheme.
Rs 60 crore was allotted to Panchayati Raj Institutions to purchase PPEs and for other prevention activities.
A one-time cash transfer of Rs 1000 to over 15 lakh construction workers was announced. Similar cash transfer of Rs 1000 was announced for poor people who were deprived of livelihood during the lockdown, particularly those people with no social security benefits. Eligible families would be selected through the Aadhaar database. Further, an additional cash transfer of Rs 1500 to needy eligible families from different categories was announced.
The state also announced an aid of Rs 50 lakh to the families of frontline workers who lose their lives due to COVID-19.
To maintain social distancing, the government will conduct a door-to-door distribution of ration to select beneficiaries in rural areas of the state. The government also announced the distribution of free wheat for April, May, and June, under the National Food Security Act, 2013. Ration will also be distributed to stranded migrant families from Pakistan, living in the state.
The government announced free tractor & farming equipment on rent in tie-up with farming equipment manufacturers to assist economically weak small & marginal farmers.
Other Measures
Education: Project SMILE was launched to connect students and teachers online during the lockdown. Study material would be sent through specially formed Whatsapp groups. For each subject, 30-40 minute content videos have been prepared by the Education Department.
Industry: On April 18, new guidelines were issued for industries and enterprises to resume operations from April 20 onwards. Industries located in rural areas or export units / SEZs in municipal areas where accommodation facilities for workers are present, are allowed to function. Factories have been permitted to increase the working hours from 8 hours to 12 hours per day, to reduce the requirement of workers in factories. This exemption has been allowed for the next three months for factories operating at 60% to 65% of manpower capacity.
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.
