Speaker Meira Kumar has urged political parties to arrive at a consensus on the women’s reservation bill. The 2008 Bill has the following main features. 1. It reserves one-third of all seats in Lok Sabha and Legislative Assemblies within each state for women. 2. There is quota-within-quota for SCs, STs and Anglo-Indians. 3. The reserved seats will be rotated after each general elections – thus after a cycle of three elections, all constituencies would have been reserved once. This reservation will be operational for 15 years. This Bill has had a chequered history. A similar Bill was introduced in 1996, 1998 and 1999 – all of which lapsed after the dissolution of the respective Lok Sabhas. A Joint Parliamentary Committee chaired by Geeta Mukherjee examined the 1996 Bill and made seven recommendations. Five of these have been included in the latest 2008 Bill. These are (i) reservation for a period of 15 years; (ii) including sub-reservation for Anglo Indians; (iii) including reservation in cases where the state has less than three seats in Lok Sabha (or less than three seats for SCs/STs); (iv) including reservation for the Delhi assembly; and (v) changing “not less than one-third” to “as nearly as may be, one-third”. Two of the recommendations are not incorporated in the 2008 Bill. The first is for reserving seats in Rajya Sabha and Legislative Councils. The second is for sub-reservation for OBC women after the Constitution extends reservation to OBCs. The 2008 Bill was referred to the Standing Committee on Law and Justice. This Committee failed to reach a consensus in its final report. The Committee has recommendedthat the Bill “be passed in Parliament and put in action without further delay. Two members of the Committee, Virender Bhatia and Shailendra Kumar (both belonging to the Samajwadi Party) dissented stating that they were not against providing reservation to women but disagreed with the way this Bill was drafted. They had three recommendations: (i) every political party must distribute 20% of its tickets to women; (ii) even in the current form, reservation should not exceed 20% of seats; and (iii) there should be a quota for women belonging to OBCs and minorities. The Standing committee considered two other methods of increasing representation. One suggestion (part of election commission recommendations) was to requite political parties to nominate women for a minimum percentage of seats. The committee felt that parties could bypass the spirit of the law by nominating women to losing seats. The second recommendation was to create dual member constituencies, with women filling one of the two seats from those constituencies. The Committee believed that this move could “result in women being reduced to a subservient status, which will defeat the very purpose of the Bill”. It is interesting to note that the Committee did not reject the two recommendations of the Geeta Mukherjee Committee that are not reflected in the Bill. The Committee concluded that the issue of reservations to Rajya Sabha and Legislative Councils needs to be examined thoroughly as the upper Houses play an equally important role under the Constitution. Incidentally, it is not possible to reserve seats in Rajya Sabha given the current system of elections to that house (see Appendix below). On the issue of reservations to OBC women, the Committee said that “all other issues may be considered at an appropriate time by Government without any further delay at the present time in the passage of the Bill”. Though the Bill does not have a consensus – it has been opposed by SP, RJD and JD(U) – most parties have publicly expressed their support for it. The government will likely not find it difficult to muster two-third support in each House of Parliament were the Bill be taken up for consideration and passing. It would be interesting to see whether the Bill is brought before Parliament in the upcoming Budget Session. Appendix: Impossibility of Reservation in Rajya Sabha Article 80of the Constitution specifies that members of state assemblies will elect Rajya Sabha MPs through single transferable vote. This implies that the votes are first allocated to the most preferred candidate, and then to the next preferred candidate, and so on. This system cannot accommodate the principle of reserving a certain number of seats for a particular group. Currently, Rajya Sabha does not have reservation for SCs and STs. Therefore, any system that provides reservation in Rajya Sabha implies that the Constitution must be amended to jettison the Single Transferable Vote system.
Finances of the Railways were presented along with the Union Budget on February 1, 2018 (the Railways Budget was merged with the Union Budget last year). In the current Budget Session, Lok Sabha is scheduled to discuss the allocation to the Ministry of Railways. In light of this, we discuss Railways’ finances, and issues that the transporter has been facing with regard to financing.
What are the different sources of revenue for Railways?
Indian Railways has three primary sources of revenue: (i) its own internal resources (revenue from freight and passenger traffic, leasing of railway land, etc.), (ii) budgetary support from the central government, and (iii) extra budgetary resources (such as market borrowings, institutional financing).
Railways’ internal revenue for 2018-19 is estimated at Rs 2,01,090 crore which is 7% higher than the revised estimates of 2017-18. Majority of this revenue comes from traffic (both freight and passenger), and is estimated at Rs 2,00,840 crore. In the last few years, Railways has been struggling to run its transportation business, and generate its own revenue. 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 (see Figure 1). Railways is also slowly losing traffic share to other modes of transport such as roads and airlines. The share of Railways in total freight traffic has declined from 89% in 1950-51 to 30% in 2011-12.
The Committee on Restructuring Railways (2015) had observed that raising revenue for Railways is a challenge because: (i) investment is made in projects that do not have traffic and hence do not generate revenue, (ii) the efficiency improvements do not result in increasing revenue, and (iii) delays in projects results in cost escalation, which makes it difficult to recover costs. Railways also provides passenger fares that are heavily subsidised, which results in the passenger business facing losses of around Rs 33,000 crore in a year (in 2014-15). Passenger fares are also cross-subsidised by charging higher rates for freight. The consequence is that freight rates have been increasing which has resulted in freight traffic moving towards roads.
Figure 2 shows the trends in capital outlay over the last decade. A decline in internal revenue generation has meant that Railways funds its capital expenditure through budgetary support from the central government and external borrowings. While the support from central government has mostly remained consistent, Railways’ borrowings have been increasing. Various committees have noted that an increased reliance on borrowings will further exacerbate the financial situation of Railways.
The total proposed capital outlay (or capital expenditure) for 2018-19 is Rs 1,48,528 crore which is a 24% increase from the 2017-18 revised estimates (Rs 1,20,000 crore). Majority of this capital expenditure will be financed through borrowings (55%), followed by the budgetary support from the central government (37%). Railways will fund only 8% of its capital expenditure from its own internal resources.
How can Railways raise more money?
The Committee on Restructuring Railways had suggested that Railways can raise more revenue through private participation in the following ways: (i) service and management contracts, (ii) leasing to and from the private sector, (iii) joint ventures, and (iv) private ownership. However, private participation in Railways has been muted as compared to other sectors such as roads, and airports.
One of the key reasons for the failure of private participation in Railways is that policy making, the regulatory function, and operations are all vested within the same organisation, that is, the Ministry of Railways. Railways’ monopoly also discourages private sector entry into the market. The Committee on Restructuring Railways had recommended that the three roles must be separated from each other. It had also recommended setting up an independent regulator for the sector. The regulator will monitor whether tariffs are market determined and competitive.
Where does Railways spend its money?
The total expenditure for 2018-19 is projected at Rs 1,88,100 crore, which is 4% higher than 2017-18. Staff wages and pension together comprise more than half of the Railways’ expenditure. For 2018-19, the expenditure on staff is estimated at Rs 76,452 crore. Allocation to the Pension Fund is estimated at Rs 47,600 crore. These constitute about 66% of the Railways’ expenditure in 2018-19.
Railways’ primary expenditure, which is towards the payment of salaries and pension, has been gradually increasing (with a jump of around 15% each year in 2016-17 and 2017-18 due to implementation of the Seventh Pay Commission recommendations). Further, the pension bill is expected to increase further in the years to come, as about 40% of the Railways staff was above the age of 50 years in 2016-17.
The Committee on Restructuring Railways (2015) had observed that the expenditure on staff is extremely high and unmanageable. This expense is not under the control of Railways and keeps increasing with each Pay Commission revision. It has also been observed that employee costs (including pensions) is one of the key components that reduces Railways’ ability to generate surplus, and allocate resources towards operations.
What is the allocation towards depreciation of assets?
Railways maintains a Depreciation Reserve Fund (DRF) to finance the costs of new assets replacing the old ones. In 2018-19, appropriation to the DRF is estimated at Rs 500 crore, 90% lower than 2017-18 (Rs 5,000 crore). In the last few years, appropriation to the DRF has decreased significantly from Rs 7,775 crore in 2014-15 to Rs 5,000 crore last year. Provisioning Rs 500 crore towards depreciation might be an extremely small amount considering the scale of infrastructure managed by the Indian Railways, and the requirement to replace old assets to ensure safety.
The Standing Committee on Railways (2015) had observed that appropriation to the DRF is the residual amount after appropriation to the Pension Fund, instead of the actual requirement for maintenance of assets. Under-provisioning for the DRF has also been observed as one of the reasons behind the decline in track renewals, and procurement of wagons and coaches.
Is there any provision towards safety?
Last year, the Rashtriya Rail Sanraksha Kosh was created to provide for passenger safety. It was to have a corpus of one lakh crore rupees over a period of five years (Rs 20,000 crore per year). The central government was to provide a seed amount of Rs 1,000 crore, and the remaining amount would be raised by the Railways from their own revenues or other sources.
As per the revised estimates of 2017-18, no money was allocated towards this fund. In 2018-19, Rs 5,000 crore has been allocated for it. With the Railways struggling to meet its expenditure and declining internal revenues, it is unclear how Railways will fund the remaining amount of Rs 95,000 crore for the Rail Sanraksha Kosh.
What happened to the dividend that was waived off last year?
Railways used to pay a return on the budgetary support it received from the government every year, known as dividend. The rate of this dividend was about 5% in 2015-16. From 2016-17, the requirement of paying dividend was waived off. The last dividend amount paid was Rs 8,722 crore in 2015-16.
The Standing Committee on Railways (2017) had noted that part of the benefit from dividend is being utilised to meet the shortfall in the traffic earnings of Railways. This defeats the purpose of removing the dividend liabilities since they are not being utilised in creating assets or increasing the net revenue of Railways.
