Indian Railways rationalises freight fares

Policy

Indian Railways rationalises freight fares

Prachee Mishra - November 14, 2018 Comments

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.

Railways fig1

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.

Figure 2_Railways

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.

Fig 3_Railways

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 ’.

Examining pendency of cases in the Judiciary

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Roshni Sinha - August 8, 2019 Comments

Yesterday, Parliament passed a Bill to increase the number of judges in the Supreme Court from 30 to 33 (excluding the Chief Justice of India). The Bill was introduced in view of increasing pendency of cases in the Supreme Court. In 2012, the Supreme Court approved the Scheme of National Court Management System to provide a framework for case management. The scheme estimated that with an increase in literacy, per capita income, and population, the number of new cases filed each year may go up to 15 crore over the next three decades, which will require at least 75,000 judges. In this blog, we analyse the pendency of cases at all three levels of courts, i.e. the Supreme Court, the Highs Courts, and the subordinate courts, and discuss the capacity of these courts to dispose of cases.

Pendency in courts has increased over the years; 87% of all pending cases are in subordinate courts

Sources: Court News, 2006, Supreme Court of India; National Data Judicial Grid accessed on August 7, 2019; PRS.

Overall, the pendency of cases has increased significantly at every level of the judicial hierarchy in the last decade. Between 2006 and now, there has been an overall increase of 22% (64 lakh cases) in the pendency of cases across all courts. As of August 2019, there are over 3.5 crore cases pending across the Supreme Court, the High Courts, and the subordinate courts. Of these, subordinate courts account for over 87.3% pendency of cases, followed by 12.5% pendency before the 24 High Courts. The remaining 0.2% of cases are pending with the Supreme Court. The primary reason for growing pendency of cases is that the number of new cases filed every year has outpaced the number of disposed of cases. This has resulted in a growing backlog of cases.

In High Courts and subordinate courts, over 32 lakh cases pending for over 10 years

Sources: National Data Judicial Grid accessed on August 7, 2019; Court News, 2006-17, Supreme Court of India; PRS.

In the High Courts, over 8.3 lakh cases have been pending for over 10 years. This constitutes 19% of all pending High Court cases. Similarly, in the subordinate courts, over 24 lakh cases (8%) have been pending for over 10 years. Overall, Allahabad High Court had the highest pendency, with over seven lakh cases pending as of 2017.

Despite high pendency, some High Courts have managed to reduce their backlog. Between 2006 and 2017, pendency of cases reduced the most in Madras High Court at a rate of 26%, followed by Bombay High Court at 24%. Conversely, during the same period, the pendency of cases doubled in the Andhra Pradesh High Court, and increased by 2.5 times in Karnataka High Court.

As a result of pendency, number of under-trials in prison is more than double that of convicts

Sources: Prison Statistics in India, 2015, National Crime Record Bureau; PRS.

Over the years, as a result of growing pendency of cases for long periods, the number of undertrials (accused awaiting trial) in prisons has increased. Prisons are running at an over-capacity of 114%. As of 2015, there were over four lakh prisoners in jails. Of these, two-thirds were undertrials (2.8 lakh) and the remaining one-third were convicts.

The highest proportion of undertrials (where the number of inmates was at least over 1,000) were in J&K (85%), followed by Bihar (82%). A total of 3,599 undertrials were detained in jails for more than five years. Uttar Pradesh had the highest number of such undertrials (1,364) followed by West Bengal (294).

One interesting factor to note is that more criminal cases are filed in subordinate courts than in High Courts and Supreme Court. Of the cases pending in the subordinate courts (which constitute 87% of all pending cases), 70% of cases were related to criminal matters. This increase in the pendency of cases for long periods over the years may have directly resulted in an increase in the number of undertrials in prisons. In a statement last year, the Chief Justice of India commented that the accused in criminal cases are getting heard after serving out their sentence.

Vacancies in High Courts and Subordinate Courts affect the disposal of cases

Sources: Court News, 2006-17, Supreme Court of India; PRS.

Vacancy of judges across courts in India has affected the functioning of the judiciary, particularly in relation to the disposal of cases. Between 2006 and 2017, the number of vacancies in the High Courts has increased from 16% to 37%, and in the subordinate courts from 19% to 25%. As of 2017, High Courts have 403 vacancies against a sanctioned strength of 1,079 judges, and subordinate courts have 5,676 vacancies against a sanctioned strength of 22,704 judges. As of 2017, among the major High Courts (with sanctioned strength over 10 judges), the highest proportion of vacancies was in Karnataka High Court at 60% (37 vacancies), followed by Calcutta High Court at 54% (39 vacancies). Similarly, in major subordinate courts (with sanctioned strength over 100 judges), the highest proportion of vacancies was in Bihar High Court at 46% (835 vacancies), followed by Uttar Pradesh High Court at 42% (1,348 vacancies).

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Explainer: The Code on Occupation Safety, Health and Working Condition

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Anya Bharat Ram - July 31, 2019 Comments

Presently, there are around 40 central laws regulating different aspects of labour such as, industrial dispute resolution, bonus payments, and working conditions. The Ministry of Labour and Employment has proposed to consolidate these laws into four codes—wages, social security, industrial safety and welfare, and industrial relations.

The Occupational Safety, Health and Working Conditions Code, 2019 was introduced in Lok Sabha on July 23, 2019.[1] The Code consolidates 13 labour laws relating to safety, health and working conditions. These include the Factories Act, 1948, the Mines Act, 1952, and the Contract Labour (Regulation and Abolition) Act, 1970. In this context, we explain key provisions of the Code.

Who will be covered under the Code?

The Code applies to organisations employing at least 10 workers, and to all mines and docks. Provisions of this Code will cover both employees and workers. Employees include individuals in managerial and administrative positions. However, the Code does not apply to apprentices, or to offices of the central or state governments.

Does the Code create special provisions for different types of organisations and workers?

Apart from prescribing health and safety provisions that apply to all organisations, the Code also outlines special requirements for different types of organisations (such as factories and mines) and workers (such as beedi and cigar workers). These special provisions include exceptions or additional requirements. For example, under the Code, factories are required to get a license in addition to registering under the general provisions of the Code. Similarly, the Code requires certain contractors to get licenses before hiring any contract labour. Further, audio-visual workers can only be hired after signing an agreement with employers, which must be registered with a government authority.

What are the duties of employers and employees?

The Code lays down several duties of employers. These include, providing a workplace that is free from hazards that may cause injury or diseases, and providing free annual health examinations to employees. For certain organisations such as, factories and mines, the employer may have additional responsibilities. These include the obligation to notify authorities in case of an accident at the workplace that leads to death or serious bodily injury of an employee.

Under the Code, employees must take care of their own health and safety, comply with the specified standards, and report unsafe situations to the inspector-cum-facilitator. Employees also have the right to obtain information related to safety and health standards from the employer. They may do this by directly approaching the employer, or through a Safety Committee representative.

Will work hours be uniform for all workers and employees?

Work hours for different types of organisations and employees will be notified by the government. This is different from the current labour laws, many of which specify work hours within the law itself. For example, the Factories Act, 1948 provides for a maximum 10 hours of work per day and 60 hours of work per week.[2]

The Code also changes work hour requirements for women. The current laws such as, the Mines Act, 1952, and the Plantations Labour Act, 1951, prohibit women from working after 7 pm and before 6 am.^{[3]^,[4]} However, the Code permits female workers to work past 7 pm and before 6 am with their consent and the approval of the government.

What working conditions and welfare facilities does the Code provide for?

The employer is required to provide a hygienic work environment with: (i) ventilation, (ii) comfortable temperature, (iii) sufficient space, (iv) clean drinking water, and (v) latrine and urinal accommodations. In addition, the government may specify certain other facilities such as, canteens, first aid boxes, and crèches that an employer must provide for. This is a shift from the current legislation which provides for welfare facilities like canteens and crèches, in the law itself. For instance, the Factories Act, 1948 requires the provision of canteens, ambulances, and first aid kits for organisations depending on the number of workers employed in the organisation.²

What is the leave policy for workers?

The Code states that no employee can be made to work for more than six days a week. However, exceptions could be provided for motor transport workers. Annually, workers must receive one day off for every 20 days they have worked. While calculating annual leave, maternity leave and periods of lay off will be counted as days spent on duty.

What are the authorities set up under the Code?

The Code requires central and state governments to set up Occupational Safety and Health Advisory Boards at the national and state level, respectively. These Boards will advise the central and state governments on the standards, rules, and regulations to be framed under the Code.

The composition of the National Advisory Board includes five representatives for employers, five representatives of employees, and five reputed persons from the fields related to occupational health and safety, amongst other members. The composition of State Advisory Boards will be decided by state governments.

How is the Code being enforced?

An inspector-cum-facilitator may be appointed by the government to inspect workplaces, inquire and investigate accidents, and provide safety information to workers. In the case of factories, mines, and docks, the inspector may close or restrict employment in parts of the organisation if there is a health and safety risk.

The Code also prescribes penalties for violating provisions of the Code. An offence that leads to the death of an employee could result in imprisonment of up to two years, or a fine up to five lakh rupees, or both. Further, at least 50% of such fine may be given as compensation to the heirs of the victim. For any other violation where the penalty is not specified, the employer will be penalised with a fine between two and three lakh rupees. On the other hand, if an employee violates provisions of the Code, he could be fined up to Rs 10,000.

Does the Code provide gender specific provisions?

The Code includes certain provisions specific to female and transgender workers. With respect to women, the government can prohibit employment of women in certain organisations if working there may be dangerous to their health and safety. Further, the Code allows female workers to work night shifts with their consent and subject to approval of the government. The Code also acknowledges transgender persons as a third gender by requiring separate urinal and latrine accommodations, rest rooms, washing spaces, and locker rooms for male, female, and transgender workers.

[1] Occupational Safety, Health and Working Conditions Code, 2019, Ministry of Labour and Employment, https://www.prsindia.org/sites/default/files/bill_files/Occupational%20Safety%2C%20Health%20and%20Working%20Conditions%20Code%2C%202019.pdf.

[2] Factories Act, 1948, Ministry of Labour and Employment, https://labour.gov.in/sites/default/files/TheFactoriesAct1948.pdf

[3] Mines Act, 1952, http://www.dgms.gov.in/writereaddata/UploadFile/Mines%20Act,%201952.pdf.

[4] Plantations Labour Act, 1951, https://labour.gov.in/sites/default/files/The-Plantation-Labour-Act-1951.pdf.

[5] Beedi and Cigar Workers (Conditions of Employment) Act, 1966, http://labour.bih.nic.in/acts/beedi-and-cigar-workers-act-1966.pdf.