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Most legislative assemblies make Parliament look like a paragon of virtue A COUPLE of days ago, an MLA from Orissa made news for climbing on to the speaker's table in the assembly. Not so long ago, television screens beamed images of Karnataka MLAs snacking and sleeping all night in the assembly. But these are only indicative of the incidents of the raucous behaviour of several MLAs in the recent past across the country. And the poor behaviour of some MLAs is only one aspect of the pitiable state of several of our state legislatures. The other aspect of our state legislatures that goes largely unnoticed is how poorly the secretariats of legislatures are equipped and how several systems that are seen as essential in Parliament are nonexistent in states. Even to know the complete picture of how our legislatures function, you need data. And several state assemblies are notoriously poor at putting out data on the functioning of the institution or the MLAs. After one gets used to the quality of Parliament websites and the regularity of their updates, it would be shocking to see that there are some state legislatures that do not even have functional websites. It has been observed that some state legislatures are lagging behind by a couple of years in compiling the "resume of work" which summarises the work done in a session of the legislature. So the first bottleneck in several instances is the inability to access data of the assembly. From the data we have managed to access, it is obvious that state assemblies meet for very few days a year. A case in point is the Punjab assembly which has met for an average of 19 days per year for a 10-year period between 1997 and 2007. Delhi was only marginally better averaging 21 days per year during the same period. Kerala has averaged some 50 days a year for several years now. Some states like Karnataka have legislated that they should meet for at least 60 days a year, but since passing that legislation in 2005, they have not managed to do so for even one year. I am not even accounting for the time lost due to disruptions. Bills are passed with little or no discussion in many state legislatures. While in Parliament, referring bills to the standing committees is the norm, most state legislatures do not have standing committees. The only examination of a bill, if any, happens on the floor of the House. And if data from the Delhi assembly is anything to go by, the average debate on a bill before is passed is a little over half hour. There are any number of instances where bills are introduced and passed in state assemblies on the same day -so there is not even a pretence of the need for MLAs to read, understand and deliberate on the provisions of legislation they are supposedly passing. MLAs are often far more narrowly constituency-focused than MPs are. On average, MLAs have lower education levels than members of Parliament. There is no formal definition of a role of an MLA, and they mostly have no exposure to ideas such as the separation of powers between the executive and the legislature. In one particularly revealing conversation with an MLA, he said, "At the time of elections, each of the contestants represents his party. But after the elections, the chiefministerbecomestheleader of all MLAs in the House. If an MLAneedssomeadditionalprojects/ favours for his constituency he needs to be in the good books of the chief minister and his cabinet ministers. So where is the question of taking on the chief minister on the floor of the House on any issue?" There are many aspects of state legislatures that point to a steady and visible decline of these important institutions. But beyond the frequent highlighting of theatrics by some MLAs, there is almost no public discourse on this issue. It is necessary to ensure that the legislatures run smoothly, and the speaker, as first among equals, has the biggest responsibility to ensure this. If there are rules and everyone knows that those rules will never be used to enforce discipline, then the rules will be broken, and repeatedly so. This practice needs to be urgently reviewed. The larger question is whether our legislatures are the highest deliberating and policymaking bodies or whether they are being reduced to platforms for political theatrics. Policy can almost never be devoid of politics and public posturing. But if this means poor deliberation of critical policy issues and the woefully inadequate functioning of our legislatures, then we may need to come up with creative ways in which this problem can be addressed. This article appeared in the Indian Express on December 20, 2010.
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.
