By Chakshu Rai and Anirudh Burman What is the difference between a JPC and a PAC? A structured committee system was introduced in 1993 to provide for greater scrutiny of government functioning by Parliament. Most committees of Parliament include MPs from both the Lok Sabha and Rajya Sabha. A Joint Parliamentary Committee (JPC) is an ad-hoc body. It is set up for a specific object and duration. Joint committees are set up by a motion passed in one house of Parliament and agreed to by the other. The details regarding membership and subjects are also decided by Parliament. For example, the motion to constitute a JPC on the stock market scam (2001) and pesticide residues in soft drinks (2003) was moved by the government in the Lok Sabha. The motion on the stock market scam constituted a JPC of 30 members of which 20 were from the Lok Sabha and 10 were from the Rajya Sabha. The motion to constitute the JPC on pesticides included 10 members from the Lok Sabha and 5 from the Rajya Sabha. The terms of reference for the JPC on the stock market scam asked the committee to look into financial irregularities, to fix responsibility on persons and institutions for the scam, to identify regulatory loopholes and also to make suitable recommendations. The Public Accounts Committee (PAC), however, is constituted every year. Its main duty is to ascertain how the money granted (budget) by Parliament has been spent by the government. The PAC scrutinises the accounts of the government on the basis of CAG reports. The composition and functions of the committee are governed by parliamentary procedures. The PAC can consist of 15 to 22 members. Not more than 15 members can be from the Lok Sabha, and the representation from the Rajya Sabha cannot exceed 7 members. A minister cannot be a member of the PAC. What can a JPC do that a PAC cannot? The PAC examines cases involving losses and financial irregularities. Its examination is usually limited to the scrutiny of CAG reports and issues raised by the reports. The committee expresses no opinion on points of general policy, but it is within PAC’s jurisdiction to point out whether there has been waste in carrying out that policy. The mandate of a JPC depends on the motion constituting it. This need not be limited to the scrutiny of government finances. How many JPCs have we had so far? Although a number of joint committees have been formed since Independence, four major JPCs have been formed to investigate significant issues that have caused controversy. These are: (1) Joint Committee on Bofors Contracts; (2) Joint Committee to enquire into irregularities in securities and banking transactions; (3) Joint Committee on stock-market scam; and (4) Joint Committee on pesticide residues in and safety standards for soft drinks. How effective have JPCs been? Is the government bound by their recommendations? JPC recommendations have persuasive value but the committee cannot force the government to take any action on the basis of its report. The government may decide to launch fresh investigations on the basis of a JPC report. However, the discretion to do so rests entirely with the government. The government is required to report on the follow-up action taken on the basis of the recommendations of the JPC and other committees. The committees then submit ‘Action Taken Reports’ in Parliament on the basis of the government’s reply. These reports can be discussed in Parliament and the government can be questioned on the basis of the same. How effective is the PAC process? Between 2005 and 2010, the PAC has prepared 54 reports and examined ministries that have cumulatively received around 80% of the budgetary allocations in the last five financial years. Since it is not possible to examine every CAG audit finding in a formal manner, ministries have to submit Action Taken Notes to the PAC on all audit paragraphs. A 2009-10 report of the PAC, however, noted that there were 4,934 audit paragraphs still pending with various ministries. What can the JPC or the PAC find in the 2G case that is not already known, that the CAG and the Trai have not already said? The JPC or the PAC can only look at the documents and examine ministry officials who testify before the committee. The parliamentary committees can arrive at independent conclusions based on the documents placed before them. Members of the committee can also place dissent notes if they do not agree with the majority. Can Raja be tried and the telecom licences cancelled on basis of a JPC report or do we need a CBI report as well? Prosecution of individuals and cancellation of licences are executive functions and can only be initiated by the government. A JPC report can recommend the prosecution of a particular person or the cancellation of certain licences. However, the government can disagree with the JPC’s findings and refuse to take such action. How much of Parliament time have we lost already and how many critical Bills are stuck? The Lok Sabha and Rajya Sabha are supposed to work daily for six hours and five hours, respectively. The Lok Sabha has worked for five hours and forty five minutes and Rajya Sabha has worked for an hour and twenty five minutes in the past 12 days. Some important Bills that are listed for consideration and passing in Parliament are the Seeds Bill, 2004; the Commercial Division of High Courts Bill, 2009; and the Amendment to the Right to Education Act, 2010. Bills listed for introduction include the National Identification Authority Bill, 2010; the Protection of Women from Sexual Harassment in Workplace Bill, 2010; the Judicial Standards and Accountability Bill, 2010; Land Acquisition (Amendment) Bill; and the Rehabilitation and Resettlement Bill. This article appeared in Financial Express.
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.
