Each year during the Budget Session, Rajya Sabha examines the working of certain ministries. This year it has identified four ministries for discussion, which includes the Ministry of Home Affairs. In light of this, we analyse some key functions of the Ministry and the challenges in carrying out these functions.
What are the key functions of Ministry of Home Affairs?
The Ministry of Home Affairs (MHA) is primarily responsible for: (i) maintenance of internal security, (ii) governance issues between the centre and states, and (iii) disaster management. It also discharges several other key functions that include: (i) border management, (ii) administration of union territories, (iii) implementation of provisions relating to the official languages, and (iv) conducting the population census every ten years.
Under the Constitution, ‘public order’ and ‘police’ are state list subjects. The MHA assists the state governments by providing them: (i) central armed police forces, and (ii) financial assistance for modernising state police forces, communication equipment, weaponry, mobility, training and other police infrastructure.
What is the role of the central armed police forces?
The MHA manages seven central police forces: (i) Central Reserve Police Force (CRPF) which assists in internal security and law and order, (ii) Central Industrial Security Force (CISF) which protects vital installations (like airports) and public sector undertakings, (iii) National Security Guards which is a special counter-terrorism force, and (iv) four border guarding forces, namely, Border Security Force (BSF), Indo-Tibetan Border Police (ITBP), Sashastra Seema Bal (SSB) and Assam Rifles (AR).
As of January 2017, the total sanctioned strength of the seven CAPFs was 10. 8 lakhs. However, 15% of these posts (i.e., about 1.6 lakhs posts) were lying vacant. The vacancy in the CAPFs has remained above 7% for the last five years (see Table 1). In 2017, the Sashastra Seema Bal had the highest vacancy (57%). The CRPF, which accounts for 30% of the total sanctioned strength of the seven CAPFs, had a vacancy of 8%.
How does MHA assist the police forces?
In Union Budget 2018-19, Rs 1,07,573 crore has been allocated to the Ministry of Home Affairs. The Ministry has estimated to spend 82% of this amount on police. The remaining allocation is towards grants to Union Territories, and other items including disaster management, rehabilitation of refugees and migrants, and the Union Cabinet.
The MHA has been implementing Modernisation of Police Forces (MPF) scheme since 1969 to supplement the resources of states for modernising their police forces. Funds from the MPF scheme are utilised for improving police infrastructure through construction of police stations, and provision of modern weaponry, surveillance, and communication equipment. Some other important objectives under the scheme include upgradation of training infrastructure, police housing, and computerisation.
The scheme has undergone revision over the years. A total allocation of Rs 11,946 crore was approved for the MPF scheme, for a five-year period between 2012-13 to 2016-17. Following the recommendations of the 14th Finance Commission (to increase the share of central taxes to states), it was decided that the MPF scheme would be delinked from central government funding from 2015-16 onwards. However, in September 2017, the Union Cabinet approved an outlay of Rs 25,060 crore under the scheme, for the period 2017-18 to 2019-20. The central government will provide about 75% of this amount, and the states will provide the remaining 25%.
The Comptroller and Auditor General (CAG) has found that weaponry in several state police forces is outdated, and there is a shortage of arms and ammunitions. An audit of Rajasthan police force(2009-14) found that there was a shortage of 75% in the availability of modern weapons against the state’s requirements. In case of West Bengal and Gujarat police forces, CAG found a shortage of 71% and 36% respectively. Further, there has been a persistent problem of underutilisation of modernisation funds by the states. Figure 1 shows the level of utilisation of modernisation funds by states between 2010-11 and 2016-17.
What are the major internal security challenges in India?
Maintaining internal security of the country is one of the key functions of the MHA. The major internal security challenges that India faces are: (i) terrorist activities in the country, (ii) cross-border terrorism in Jammu and Kashmir, (iii) Left Wing Extremism in certain areas, and (iv) insurgency in the North-Eastern states.
Between 2015 and 2016, the number of cross-border infiltrations in Jammu and Kashmir increased by almost three times, from 121 to 364. On the other hand, incidents of insurgency in Left Wing Extremism areas have decreased from 1,048 in 2016 to 908 in 2017.
The Standing Committee on Home Affairs noted in 2017-18 that security forces in Jammu and Kashmir are occupied with law and order incidents, such as stone pelting, which gives militants the time to reorganise and perpetrate terror attacks. The Committee recommended that the MHA should adopt a multi-pronged strategy that prevents youth from joining militancy, curbs their financing, and simultaneously launch counter-insurgency operations.
In relation to Left Wing Extremism, the Standing Committee (2017) observed that police and paramilitary personnel were getting killed because of mine blasts and ambushes. It recommended that the MHA should make efforts to procure mine-resistant vehicles. This could be done through import or domestic manufacturing under the ‘Make in India’ programme.
What is the MHA’s role in border management?
India has a land border of over 15,000 kms, which it shares with seven countries (Pakistan, China, Bangladesh, Nepal, Myanmar, Bhutan, and Afghanistan). Further, it has a coastline of over 7,500 kms. The MHA is responsible for: (i) management of international lands and coastal borders, (ii) strengthening of border guarding, and (iii) creation of infrastructure such as roads, fencing, and lighting of borders.
Construction of border outposts is one of the components of infrastructure at border areas. The Standing Committee on Home Affairs (2017) noted that the proposal to construct 509 outposts along the India-Bangladesh, and India-Pakistan borders had been reduced to 422 outposts in 2016. It recommended that such a reduction should be reconsidered since 509 outposts would reduce the inter-border outpost distance to 3.5 kms, which is important for the security of the country.
How is coastal security carried out?
Coastal security is jointly carried out by the Indian Navy, Indian Coast Guard, and marine police of coastal states and Union Territories. The MHA is implementing the Coastal Security Scheme to strengthen the marine police of nine coastal states and four Union Territories by enhancing surveillance, and improve patrolling in coastal areas. Under this scheme, the Ministry sought to construct coastal police stations, purchase boats, and acquire vehicles for patrolling on land, among other objectives.
The Standing Committee on Home Affairs (2017) observed that the implementation of Phase-II of this scheme within the set time-frame has not been possible. It also noted that there was lack of coordination between the Indian Navy, the Indian Coast Guard, and the coastal police. In this context, the Committee recommended that the Director General, Indian Coast Guard, should be the nodal authority for coordinating operations related to coastal security.
India is one of the fastest growing aviation markets in the world. Its domestic traffic makes up 69% of the total airline traffic in South Asia. India’s airport capacity is expected to handle 1 billion trips annually by 2023. The Ministry of Civil Aviation is responsible for formulating national aviation policies and programmes. Today, Lok Sabha will discuss and vote upon the budget of the Ministry of Civil Aviation. In light of this, we discuss key issues with the aviation sector in India.
The aviation sector came under severe financial stress during the Covid-19 pandemic. After air travel was suspended in March 2020, airline operators in India reported losses worth more than Rs 19,500 crore while airports reported losses worth more than Rs 5,120 crore. However, several airline companies were under financial stress before the pandemic affected passenger travel. For instance, in the past 15 years, seventeen airlines have exited the market. Out of those, two airlines, Air Odisha Aviation Pvt Ltd and Deccan Charters Pvt Ltd exited the market in 2020. Air India has been reporting consistent losses over the past four years. All other major private airlines in India such as Indigo and Spice Jet faced losses in 2018-19.
Figure 1: Operating profit/loss of major airlines in India (in Rs crore)
Note: Vistara Airlines commenced operations in 2015, while Air Asia began in 2014; Negative values indicate operating loss.
Source: Unstarred Question 1812 answered on August 4, 2021, and Unstarred Question 1127 answered on September 21, 2020; Rajya Sabha; PRS.
Sale of Air India
Air India has accounted for the biggest expenditure head of the Ministry of Civil Aviation since 2011-12. Between 2009-10 and 2020-21, the government spent Rs 1,22,542 crore on Air India through budgeted allocations. In October 2021, the sale of Air India to Talace Ltd., which is a subsidiary of Tata Sons Pvt Ltd, was approved. The bid for Air India was finalised at Rs 18,000 crore.
Up to January 2020, Air India had accumulated debt worth Rs 60,000 crore. The central government is repaying this debt in the financial year 2021-22. After the finalisation of the sale, the government allocated roughly Rs 71,000 crore for expenses related to Air India.
In addition to loan repayment, in 2021-22, the government will provide Air India with a fresh loan (Rs 4,500 crore) and grants (Rs 1,944 crore) to recover from the shock of Covid-19. To pay for the medical benefits of retired employees of Air India, a recurring expense of Rs 165 crore will be borne by the central government each year.
In 2022-23, Rs 9,260 crore is allocated towards servicing the debt of AIAHL (see Table 1). AIAHL is a Special Purpose Vehicle (SPV) formed by the government to hold the assets and liabilities of Air India while the process of its sale takes place.
Table 1: Breakdown of expenditure on Air India (in Rs crore)
|
Major Head |
2020-21 Actual |
2021-22 RE |
2022-23 BE |
% change from 2021-22 RE to 2022-23 BE |
|
|
Equity infusion in AIAHL |
- |
62,057 |
- |
-100% |
|
|
Debt servicing of AIAHL |
2,184 |
2,217 |
9,260 |
318% |
|
|
Medical benefit to retired employees |
- |
165 |
165 |
0% |
|
|
Loans to AI |
- |
4,500 |
- |
-100% |
|
|
Grants for cash losses during Covid-19 |
- |
1,944 |
- |
-100% |
|
|
Total |
2,184 |
70,883 |
9,425 |
-87% |
|
Note: BE – Budget Estimate; RE – Revised Estimate; AAI: Airports Authority of India; AIAHL – Air India Asset Holding Limited; AI – Air India. Percentage change is from RE 2021-22 to BE 2022-23.
Source: Demands for Grants 2022-23, Ministry of Civil Aviation; PRS.
Privatisation of Airports
Airports Authority of India (AAI) is responsible for creating, upgrading, maintaining and managing civil aviation infrastructure in the country. As on June 23, 2020, it operates and manages 137 airports in the country. Domestic air traffic has more than doubled from around 61 million passengers in 2013-14 to around 137 million in 2019-20. International passenger traffic has grown from 47 million in 2013-14 to around 67 million in 2019-20, registering a growth of over 6% per annum. As a result, airports in India are witnessing rising levels of congestion. Most major airports are operating at 85% to 120% of their handling capacity. In response to this, the government has decided to privatise some airports to address the problem of congestion.
AAI has leased out eight of its airports through Public Private Partnership (PPP) for operation, management and development on long term lease basis. Six of these airports namely, Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram, and Mangaluru have been leased out to M/s Adani Enterprises Limited (AEL) for 50 years (under PPP). The ownership of these airports remains with AAI and the operations will be back with AAI after the concession period is over. The Standing Committee on Transport (2021) had noted that the government expects to have 24 PPP airports by 2024.
Figure 2: Allocation towards AAI (in Rs crore)
Note: BE – Budget Estimate; RE – Revised Estimate; AAI – Airports Authority of India; IEBR – Internal and Extra-Budgetary Resources;
Source: Demand for Grant documents, Ministry of Civil Aviation; PRS.
The Committee also noted a structural issue in the way airport concessions are given. As of now, entities that bid the highest amount are given the rights to operate an airport. This leads them to pass on the high charge to airline operators. This system does not consider the actual cost of the services and leads to an arbitrary increase in the cost of airline operators. The Ministry sees the role of AAI in future policy issues to include providing high quality, safe and customer-oriented airport and air navigation services. In 2022-23, the government has allocated Rs 150 crore to AAI, which is almost ten times higher than the budget estimates of 2021-22.
Regional Connectivity Scheme (RCS-UDAN)
The top 15 airports in the country account for about 83% of the total passenger traffic. These airports are also close to their saturation limit, and hence the Ministry notes that there is a need to add more Tier-II and Tier-III cities to the aviation network. The Regional Connectivity Scheme was introduced in 2016 to stimulate regional air connectivity and make air travel affordable to the masses. The budget for this scheme is Rs 4,500 crore over five years from 2016-17 to 2021-22. As of December 16, 2021, 46% of this amount has been released. In 2022-23, the scheme has been allocated Rs 601 crore, which is 60% lower than the revised estimates of 2021-22 (Rs 994 crore).
Under the scheme, airline operators are incentivised to operate on under-served routes by providing them with viability gap funding and airport fee waivers. AAI, which is the implementing agency of this scheme, has sanctioned 948 routes to boost regional connectivity. As of January 31, 2022, 43% of these routes have been operationalised. As per the Ministry, lack of availability of land and creation of regional infrastructure has led to delays in the scheme. Issues with obtaining licenses and unsustainable operation of awarded routes also contribute to the delay. As per the Ministry, these issues, along with the setback faced due to the pandemic acted as major obstacles for the effective utilisation of funds.
Figure 3: Expenditure on Regional Connectivity Scheme (in Rs crore)
Note: BE – Budget Estimate; RE – Revised Estimate;
Source: Demand for Grants documents, Ministry of Civil Aviation; PRS.
Potential of air cargo
The Standing Committee on Transport (2021) had noted India’s cargo industry’s huge potential with respect to its geographical location, its growing economy, and its growth in domestic and international trade in the last decade. In 2019-20, all Indian airports together handled 3.33 million metric tonnes (MMT) of freight. This is much lower than the cargo handled by Hong Kong (4.5 MMT), Memphis (4.8 MMT), and Shanghai (3.7 MMT), which are the top three airports in terms of the volume of freight handled. The Standing Committee on Transport (2021) has noted inadequate infrastructure as a major bottleneck in developing the country’s air cargo sector. To reduce such bottleneck, it recommended the Ministry to establish dedicated cargo airports, and automate air cargo procedures and information systems to streamline redundant processes.
The Committee has also highlighted that the Open Sky Policy enables foreign cargo carriers to freely operate cargo services to and from any airports in India having customs/immigration facilities. They account for 90-95% of the total international cargo carried to and from the country. On the other hand, Indian air cargo operators face discriminatory practices and regulatory impediments for operating international cargo flights in foreign countries. The Committee urged the Ministry to provide a level-playing field for Indian air cargo operators and to ensure equal opportunities for them. The Ministry revised the Open Sky Policy in December 2020. Under the revised policy, the operations of foreign ad hoc and pure non-scheduled freighter charter service flights have been restricted to six airports - Bengaluru, Chennai, Delhi, Kolkata, Hyderabad, and Mumbai.
Rising cost of Aviation Turbine Fuel
The cost of Aviation Turbine Fuel (ATF) forms around 40% of the total operating cost of airlines and impacts their financial viability. ATF prices have been consistently rising over the past years, placing stress on the balance sheets of airline companies. As per recent news reports, airfares are expected to rise as the conflict between Russia and Ukraine is making ATF costlier.
ATF attracts VAT which is variable across states and does not have a provision for input tax credit. High rates of aviation fuel coupled with high VAT rates are adversely affecting airline companies.
Table 2: Expenditure on ATF by airlines over the years (in Rs crore)
|
Year |
National Carriers |
Private Domestic Airlines |
|
2016-17 |
7,286 |
10,506 |
|
2017-18 |
8,563 |
13,596 |
|
2018-19 |
11,788 |
20,662 |
|
2019-20 |
11,103 |
23,354 |
|
2020-21 |
3,047 |
7,452 |
Source: Unstarred Question 2581, Rajya Sabha; PRS.
The Ministry, in January 2020, has reduced the tax burden on ATF by eliminating fuel throughput charges that were levied by airport operators at all airports across India. Central excise on ATF was reduced from 14% to 11% w.e.f. October 11, 2018. State governments have also reduced VAT/Sales Tax on ATF drawn on RCS airports to 1% or less for 10 years. For non-RCS-UDAN operations, various state governments have reduced VAT/Sales Tax on ATF to within 5%. The Standing Committee on Transport (2021) has recommended ATF to be included within the ambit of GST and that applicable GST should not exceed 12% on ATF with full Input Tax Credit.
For more details, please refer to the Demand for Grants Analysis of the Ministry of Civil Aviation, 2022-23.
