The Budget session 2013 commenced with the President, Pranab Mukherjee, addressing Parliament on February 21, 2013. The address is a statement of the policy of the government. Yesterday a Motion of Thanks was moved in the Lok Sabha and a detailed discussion took place on the President’s address. (The significance of the President’s speech has been discussed in an article published in the Indian Express.) Below are some legislative and policy items from the agenda of the central government outlined in the speech.
Legislative and policyagenda outlined in President’s addresses between 2009-2012 and their status
|
Legislation/Policy |
Status |
|
Legislations mentioned in the President’s Address between 2009-12 |
|
| To be introduced | |
| Goods and Services Tax | Constitutional Amendment Bill introduced |
| The National Food Security Bill | Introduced |
| Amend the Land Acquisition Act and enact the Rehabilitation and Resettlement Bill | Introduced |
| Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Bill | Passed |
| The Whistleblower Bill | Pending |
| The Judicial Standards and Accountability Bill | Pending |
| The Lokpal and Lokayuktas Bill | Pending |
| A model Public Services Law (to cover officials providing important social services and commits them to their duties) | Two bills introduced: the Electronic Services Delivery Bill and the Citizen’s Charter Bill |
| The Right to Free and Compulsory Education Bill | Passed |
| The National Council for Higher Education Bill | Introduced |
| Foreign Educational Institutions Bill | Introduced |
| Protection of Children from Sexual Offences Bill | Passed |
| The Women’s Reservation Bill | Pending |
| The Mines and Minerals (Development and Regulation) Bill | Introduced |
| The Public Procurement Bill | Introduced |
| The General Anti-Avoidance Rules | Scheduled for 2016[1] |
| Amend of RTI Act (to provide for disclosure by government in all non-strategic areas) | To be introduced |
|
Policy items mentioned in the President’s Addresses between 2009-2012 |
|
| National Mission for Female Literacy – all women to be literate by 2013-14 | National Literacy Mission recast in September 2009 to focus on female literacy; as per 2011 census the female literacy rate in India is 65.46%[2] |
| Disposal of remaining claims in 2010 under the Scheduled Tribes and Other Traditional Forest Dwellers Act | As on February 28, 2010, 27.16 lakh claims had been filed, 7.59 lakh titles had been distributed and 36,000 titles were ready for distribution;[3] as on July 31, 2012, the number of claims filed for the recognition of forest rights and titles distributed are 32.28 lakh and 12.68 lakh respectively[4] |
| Introduction of Minimum Support Price (MSP) for Minor Forest Produce (MFP) being considered | Based on the recommendations of the Committee constituted by Ministry of Panchayati Raj to look into aspects of MSP, Value addition and marketing of MFP in Fifth Schedule Areas, a Central Sector Scheme of MSP for MFP has been contemplated[5] |
| Voting rights for Indian citizens living abroad | Bill passed; NRIs can vote at the place of residence mentioned in their passport |
| 12th Plan target growth 9% with 4% growth for the agricultural sector | GDP grew by 5.4% and the agriculture sector by 1.8% in the first half of the current fiscal year (2012-13) |
| Establish national investment and manufacturing zones to promote growth in manufacturing | Under the National Manufacturing Policy, 12 National Investment and Manufacturing Zones are notified, 8 of them along the Delhi Mumbai Industrial Corridor and 4 others at Nagpur, Tumkur, Chittor and Medak |
| Strengthening public accountability of flagship programmes by the creation of an Independent Evaluation Office. | Government has approved setting up of an Independent Evaluation Office and the Governing Board will be chaired by Deputy Chairman, Planning Commission |
| Unique Identity Card scheme to be implemented by 2011-12 | Bill to give statutory status pending in Parliament; enrollment until February 2013 is approximately 28 crore[6] |
| Establishment of National Counter-Terrorism Centre | Proposed launch of NCTC in March 2011 on hold as consultation with states is on; meeting held by the union government with the Chief Ministers of all the States in May 2012 |
| Conversion of analog cable TV system to digital by December 2014 | Government has implemented the first phase of digitization in Kolkata, Delhi, Chennai and Mumbai; by March 31, 2013, 38 cities with a population of more than one million will be covered |
| A roadmap for judicial reform to be outlined by the end of 2009 and implemented in a time-bound manner | Vision statement formulated in 2009 outlining road map for improving justice delivery and legal reforms and steps to reduce pendency in Courts; setting up of a National Mission for the Delivery of Justice and Legal Reforms to improve court administration and reduce pendency was approved in June 2011 |
*Introduced means introduced in one House; Pending means passed by one House and pending in the other House; Passed means passed by both Houses of Parliament.
[1] “Major Recommendations of Expert Committee on GAAR Accepted”, Press Information Bureau, Ministry of Finance, January 14, 2013.
[2] Lok Sabha, Starred Question No. 175, December 5, 2012, Ministry of Human Resource Development.
[3] Lok Sabha, Unstarred Question No. 2672, March 12, 2010, Ministry of Tribal Affairs.
[4] Lok Sabha, Starred Question No. 108, August 17, 2012, Ministry of Tribal Affairs.
[5] “PM approves Constitution of National Council for Senior Citizens”, Press Information Bureau, February 1, 2012, Prime Minister’s Office.
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’.
