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Earlier today, the Union Cabinet announced the merger of the Railways Budget with the Union Budget. All proposals under the Railways Budget will now be a part of the Union Budget. However, to ensure detailed scrutiny, the Ministry’s expenditure will be discussed in Parliament. Further, Railways will continue to maintain its autonomy and financial decision making powers. In light of this, this post discusses some of the ways in which Railways is financed, and issues it faces with regard to financing. Separation of Railways Budget and its financial implications The Railways Budget was separated from the Union Budget in 1924. While the Union Budget looks at the overall revenue and expenditure of the central government, the Railways Budget looks at the revenue and expenditure of the Ministry of Railways. At that time, the proportion of Railways Budget was much higher as compared to the Union Budget. The separation of the Budgets was done to ensure that the central government receives an assured contribution from the Railways revenues. However, in the last few years, Railways’ finances have deteriorated and it has been struggling to generate enough surplus to invest in improving its infrastructure. Indian Railways is primarily financed through budgetary support from the central government, its own internal resources (freight and passenger revenue, leasing of railway land, etc.), and external resources (market borrowings, public private partnerships, joint ventures, or market financing). Every year, all ministries, except Railways, get support from the central government based on their estimated revenue and expenditure for the year. The Railways Ministry is provided with a gross budgetary support from the central government in order to expand its network. However, unlike other Ministries, Railways pays a return on this investment every year, known as dividend. The rate of this dividend is currently at around 5%, and also includes the interest on government budgetary support received in the previous years. Various Committees have observed that the system of receiving support from the government and then paying back dividend is counter-productive. It was recommended that the practice of paying dividend can be avoided until the financial health of Railways improves. In the announcement made today, the requirement to pay dividend to the central government has been removed. This would save the Ministry from the liability of paying around Rs 9,700 crore as dividend to the central government every year. However, Railways will continue to get gross budgetary support from the central government. Declining internal revenue In addition to its core business of providing transportation, Railways also has several social obligations such as: (i) providing certain passenger and coaching services at below cost fares, (ii) running uneconomic branch lines (connectivity to remote areas), and (iii) granting concessions to various categories of people (like senior citizens, children, etc.). All these add up to about Rs 30,000 crore. Other inelastic expenses of Railways include pension charges, fuel expenses, lease payments, etc. Such expenses do not leave any financial room for the Railways to make any infrastructure investments. 
In the last few years, Railways has been struggling due to a decline in its revenue from passenger and freight traffic. In addition, the support from the central government has broadly remained constant. In 2015-16, the gross budgetary support and internal revenue saw a decline, while there was some increase in the extra budgetary resources (shown in Figure 1). Railways’ internal revenue primarily comes from freight traffic (about 65%), followed by passenger traffic (about 25%). About one-third of the passenger revenue comes from first class passenger traffic and the remaining two-third comes from second class passenger traffic. In 2015-16, Railways passenger traffic decreased by 4% and total passenger revenue decreased by 10% from the budget estimates. While revenue from second class saw a decrease of 13%, revenue from first class traffic decreased by 3%. In the last few years, Railways’ internal sources have been declining, primarily due to a decline in both passenger as well as freight traffic. Freight traffic 
The share of Railways in total freight traffic has declined from 89% to 30% over the last 60 years, with most of the share moving towards roads (see Figure 2). With regard to freight traffic, Railways generates most of its revenue from the transportation of coal (about 44%), followed by cement (8%), iron ore (7%), and food-grains (7%). In 2015-16, freight traffic decreased by 10%, and freight earnings reduced by 5% from the budget estimates. The Railways Budget for 2016-17 estimates an increase of 12% in passenger revenue and a 0.26% increase in passenger traffic. Achieving a 12% increase in revenue without a corresponding increase in traffic will require an increase in fares. Flexi fares and passenger traffic A few days ago, the Ministry of Railways introduced a flexi-fare system for certain categories of trains. Under this system, the base fare for Rajdhani, Duronto and Shatabdi trains will increase by 10% with every 10% of berths sold, subject to a ceiling of up to 1.5 times the base fare. While this could also be a way for Railways to improve its revenue, it has raised concerns about train fares becoming more expensive. Note that the flexi-fare system will apply only to first class passenger traffic, which contributes to about 8% of the total Railways revenue. It remains to be seen if the new system increases Railways revenue, or further decreases passenger traffic (people choosing other modes of travel, such as airways, if fares increase significantly). While the Railways is trying to improve revenue by raising fares, this may increase the financial burden on passengers. In the past, various Parliamentary Committees have observed that the investment planning in Railways from the government’s side is politically driven rather than need driven. This has resulted in the extension of uneconomic, un-remunerative, yet socially desirable projects in every budget. It has been recommended that projects based on social and commercial considerations must be categorised separately in the Railways accounts, and funding for the former must come from the central or state governments. It has also been recommended that Railways should bring in more accuracy in determining its public service obligations. The decision to merge the Railways Budget with the Union Budget seems to be on the lines of several of these recommendations. However, it remains to be seen whether merging the Railway Budget with the Union Budget will improve the transporter’s finances or if it would require bringing in more reforms.
With the spread of COVID-19, along with the central government, state governments have also announced several policy decisions to contain and prevent the spread of the virus. In this blog post, we summarise some of the key measures taken by the government of West Bengal in this regard as of April 18, 2020.
As of April 18, 2020, there have been 287 confirmed cases of COVID-19 in West Bengal. Of these, 55 have been discharged and 10 have died. To manage patients, there are 66 COVID hospitals, eight testing laboratories, and 582 institutional quarantine centres in the state.
Early response: Leading up to lockdown
Between January and February, the state government's efforts were aimed at raising awareness among citizens on COVID-19. These include advisories on observing precautionary measures, and informing citizens on travel restrictions, home isolation, and screening protocols for foreign returnees.
On March 2, the state government responded to the growing number of suspected cases by issuing guidelines for preparedness by government medical colleges and hospitals. These covered admission, isolation and management of suspected COVID-19 cases. These instructions were extended to private medical colleges and hospitals on March 7. A week later, the government issued protocols for monitoring travellers at various state checkposts by joint teams of state police and paramedical staff, and for reference of symptomatic patients to isolation facilities in the district. All cases had to be reported on a daily basis to district surveillance teams. The government also announced the closure of all educational institutions in the state (government and private) till March 31.
On March 16, the government notified the West Bengal Epidemic Disease COVID-19 Regulations, 2020. These regulations specify screening and treatment protocol for COVID-19 patients, and empower the district administration to take containment measures to curb the spread of COVID-19.
The next day, the state reported its first confirmed case of COVID-19. The government proceeded to issue orders: (i) for segregating isolation wards for suspected and confirmed COVID-19 cases, (ii) specifying treatment protocols for confirmed cases, (iii) establishing medical boards in all COVID-19 hospitals with representation from different medical disciplines, and (iv) establishing fever clinics for suspected patients. Anganwadi centres and creches were also closed, with provisions to ensure supply of two kilograms of rice and potatoes to each beneficiary.
On March 21, the government ordered the closure of certain establishments to restrict non-essential social gatherings till March 31, 2020. This included closure of restaurants, clubs, amusement parks, and museums. Further, all trains entering the state and inter-state buses were banned till March 31, 2020.
Subsequently, the government announced a lockdown. In addition to steps for physical containment, the government also undertook various health and welfare measures. These are detailed below.
Measures taken post-lockdown
On March 22, a lockdown was announced in 23 areas of the state until March 27. Restrictions during the lockdown included: (i) prohibition on public gatherings of over seven people, (ii) suspension of public transport, and (iii) closure of shops, commercial establishments, offices and factories. Establishments providing essential goods and services such as health services, print media, banks, groceries, and e-commerce delivery of food and groceries, were excluded from the restrictions. Over the next few weeks, steps were taken to expand these exemptions, and to regulate the movement of goods and services.
List of essential goods and services: On March 24, the lockdown was extended till March 31 in the entire state, and the exemptions were expanded to include industries producing coal, power, steel, or fertilisers. After the centre notified a 21-day lockdown, the list of exemptions in the state was gradually expanded to include agricultural operations, fish production, tea garden operations, and operations in krishak bazars for marketing agricultural produce. At the same time, restrictions were placed on hoarding of masks and hand sanitisers.
Last week, after the central government extended the lockdown till May 3, orders were passed for resumption of government offices from April 20 onwards at a strength of 25% of workforce. Similar permission was also granted for restricted operations in jute mills, and IT/IT enabled services.
Regulating movement of goods and services: A pass system was introduced on March 25 to regulate the movement of persons supplying essential goods and services. Transportation of non-essential cargo was prohibited till March 31, 2020. However, as a one-time measure, permission was granted on March 26 to such vehicles to reach their destination. Two days later, the government ordered for the seamless movement of commodities in all district borders and interstate areas.
Health Measures
On March 26, a Committee of Experts was constituted to advise on strategies for isolation, quarantine, testing, health infrastructure, and disease prevention. The Committee has been issuing protocols on clinical management of COVID-19 cases. The government also established various monitoring committees on setting up isolation hospitals, managing critical care, and to audit the cause of deaths related to COVID-19 patients.
To respond to the increasing number of patients, the government acquired private healthcare facilities in April. Further, to expand its testing capacity, the government recommended sample pooling for COVID-19 testing yesterday.
In addition to these measures, the government also issued several guidelines, advisories and orders on containment of the virus, patient handling and protecting healthcare workers. Some of these are detailed below:
For healthcare facilities: Advisory for setting up of isolation facilities, orders for establishment of fever clinics to segregate patients with severe symptoms, separation zones for suspected cases to protect healthcare personnel, and use of hydroxychloroquine for asymptomatic healthcare workers.
For government: Guidelines for cluster containment and treatment strategies to contain COVID-19 in hi-risk spots, directions for awareness generation among rural population for containment, and arranging for counselling sessions for quarantined patients.
Welfare/Austerity Measures
Creation of relief fund: The “West Bengal State Emergency Relief Fund” was created on March 23 to mobilise additional resources to cope with the emergency. On April 2, austerity measures were announced by the government. These include prohibition on announcement of new schemes, unless required in urgent public interest.
Distribution of food: Free entitlement of wheat and rice was announced on March 26 to beneficiaries under some food subsidy schemes (including the Antyodaya Anna Yojana) until September, 2020.
Measures for workers: Directions were notified in March for provisions on shelter, food, quarantine, wage payment, and continued tenancy for workers.
Free insurance cover was announced on April 1 for treatment of certain categories of persons, including heathcare workers, and police.
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.
