By Rohit & Anirudh A modified 'Modernization of State Police Forces' scheme was started by the central government in 2000-01. One of the objectives was to help police forces in meeting the emerging challenges to internal security in the form of terrorism, naxalism etc. The scheme aims to modernize police forces in terms of:
Under this scheme, States have been clubbed into different categories and Centre-State cost sharing is category specific. Since 2005-06, States have been categorized as category ‘A’ and ‘B’ with 100% and 75% Central funding respectively. All the North Eastern States, namely Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Tripura and Sikkim have been placed in category ‘A’ and thus, are entitled to receive 100% Central assistance for implementation of their annual approved plans. Recently, CAG decided to evaluate the working of the scheme and commissioned ‘performance audit’ reviews covering select general category and special category States. Each review covers a contiguous five year period between 2000 and 2007, but varies across selected states. For the periods under review, each state had a plan outlay (the total amount proposed to be spent in modernizing the state's police forces). However, in most cases, the actual release of funds fell significantly short of this outlay - in some cases the Centre did not contribute its share, in others the States lagged behind. For instance, in the case of Bihar, the Centre released only 56% of its share; while in the case of Rajasthan and West Bengal, the States did not release any funds at all. The graph below shows the actual releases by the Centre and the States (as percentages of their share in the proposed outlays): 
Further, even the funds that were released were not fully utilized. Thus, the amount finally spent fell significantly short of the initial proposal. The graph below shows the actual expenditure by State: 
Following are some of the other main findings from the CAG report:
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Table 1: Summary of main findings in the CAG audit for different states for Modernisation of State Police Forces |
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Purpose for which money was sanctioned |
Summary of CAG Findings |
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Planning (Every state has to propose an Annual Action Plan every year. The plan is approved by the Ministry of Home Affairs and money is released as per the plan.) |
§ Submissions by the states to the MHA were delayed. § There were also delays in the clearance granted by the MHA. § In various states such as, a) Andhra Pradesh – the government spent money on works not covered by the Annual Action Plan. b) Bihar – Persistent delays in preparation of the Plan by the state police. c) West Bengal – the plans drawn up by the state did not include items covered under the scheme. |
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Mobility |
§ Overall shortage of vehicles was observed. Most of the new vehicles replaced the old ones. § The police response time was too long in some states. § To give examples from some states: a) Andhra Pradesh – 58 percent of vehicles procured were utilised for replacing old vehicles. b) Bihar – the shortage of vehicles was 43 percent. c) Uttar Pradesh – 2400 vehicles were procured against a shortage of nearly 10,000 vehicles. |
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Residential and non-residential buildings |
§ There were considerable delays in construction of buildings in most states. Consequently, police forces’ own security was in jeopardy. § In states such as: a) Andhra Pradesh – 53 percent of staff quarters and 43 percent of official buildings were not completed (2007). b) Bihar – The total requirement of housing was nearly 60,000. Only six percent of this were included in the Plan. c) Jharkhand – District Control rooms remained non-functional because of shortage of manpower. |
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Weapons |
§ Police force in states continue to depend on outdated weapons. § Shortages of weapons also happened as acquisition from ordnance factories was very slow. § The weapons that were procured were mostly kept in the district headquarters. § In some states such as, a) Bihar – AK-47s were kept at the disposal of bodyguards of VIPs. b) West Bengal – Adequate weapons were not supplied to extremist prone police stations. |
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Communication |
§ Police Telecommunication Networks were not set up successfully in some states. In others, network was functional only up to the district level. § Shortages of various communication equipments were also observed. § In some states such as, a) Bihar - The Police Telecommunication Network system (costing Rs. 4.96 crore) remained non-functional due to non-construction of tower. b) Maharashtra – Of the 850 purchased Remote Station Units, 452 were lying in stores. |
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Forensic Science Laboratory/ Finger Printing Bureau |
§ In most States the Forensic Science Laboratories lacked adequate infrastructure. § In the absence of automatic finger print identification systems, investigation was being done manually in some States. § In some states such as, a) Maharashtra - There were significant delays in receipt and installation. There was also shortage (284 vacant posts) of technical manpower. b) West Bengal - Performance of the Forensic Science Laboratory was poor and in some cases, the delay in issue of investigation reports was as high as 45 months. |
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Training |
§ It was observed that the percentage of police personnel trained was very low. § Training infrastructure was also inadequate. § In some states such as, a) Bihar - Only 10 per cent of total force was trained. b) West Bengal - Live training was not imparted for handling useful weapons and this severely affected the performance of police forces. |
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Sources: CAG Compendium of Performance Audit Reviews on Modernisation of Police Force; PRS. Note: The audit has been done broadly from 2000 to 2007. Consequently, the period of audit for different states may vary. |
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Table 1: Summary of main findings in the CAG audit for different states for Modernisation of State Police Forces |
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Purpose for which money was sanctioned |
Summary of CAG Findings |
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Planning (Every state has to propose an Annual Action Plan every year. The plan is approved by the Ministry of Home Affairs and money is released as per the plan.) |
§ Submissions by the states to the Ministry of Home Affairs (MHA) were delayed. § There were also delays in the clearance granted by the MHA. § In various states such as, a) Andhra Pradesh – the government spent Rs 32 crore on works not covered by the Annual Action Plan. b) Bihar – Persistent delays in preparation of the Plan by the state police. c) West Bengal – the plans drawn up by the state did not include items covered under the scheme. |
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Mobility |
§ Overall shortage of vehicles was observed. Most of the new vehicles replaced the old ones, and no additions were made. § The police response time was too long in some states. § To give examples from some states: a) Andhra Pradesh – 58 percent of vehicles procured were utilised for replacing old vehicles. b) Bihar – the shortage of vehicles was 43 percent. c) Uttar Pradesh – 2400 vehicles were procured against a shortage of nearly 10,000 vehicles. 203 ambassador cars were procured, though only 55 were approved by the MHA. |
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Residential and non-residential buildings |
§ There were considerable delays in construction of buildings in most states. Consequently, police forces’ own security was in jeopardy. Satisfaction levels with the housing provided were also very low. § In states such as: a) Andhra Pradesh – 53 percent of staff quarters and 43 percent of official buildings were not completed (2007). b) Bihar – The total requirement of housing was nearly 60,000. Only six percent of this were included in the Plan, and only 1045 units were completed by 2006. c) Jharkhand – District Control rooms remained non-functional even after spending Rs 2 crore because of shortage of manpower. |
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Weapons |
§ It was observed that the police force in states continue to depend on outdated weapons. § Shortages of weapons also happened as acquisition from ordnance factories was very slow. § The weapons that were procured were mostly kept in the district headquarters. § In some states such as, a) Bihar – AK-47s were kept at the disposal of bodyguards of VIPs. b) West Bengal – Adequate weapons were not supplied to extremist prone police stations. |
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Communication |
§ Police Telecommunication Networks were not set up successfully in some states. In others, network was functional only up to the district level. § Shortages of various communication equipments were also observed. § In some states such as, a) Bihar - The Police Telecommunication Network system (costing Rs. 4.96 crore) remained non-functional due to non-construction of tower. b) Maharashtra – Of the 850 purchased Remote Station Units, 452 were lying in stores. |
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Forensic Science Laboratory/ Finger Printing Bureau |
§ In most States the Forensic Science Laboratories lacked adequate infrastructure. § In the absence of automatic finger print identification systems, investigation was being done manually in some States. § In some states such as, a) Maharashtra - There were significant delays in receipt and installation. There was also shortage (284 vacant posts) of technical manpower. b) West Bengal - Performance of the Forensic Science Laboratory was poor and in some cases, the delay in issue of investigation reports was as high as 45 months. |
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Training |
§ It was observed that the percentage of police personnel trained was very low. § Training infrastructure was also inadequate. § In some states such as, a) Bihar - Only 10 per cent of total force was trained. b) West Bengal - Live training was not imparted for handling useful weapons and this severely affected the performance of police forces. |
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Sources: CAG Compendium of Performance Audit Reviews on Modernisation of Police Force; PRS. Note: The audit has been done broadly from 2000 to 2007. Consequently, the period of audit for different states may vary. |
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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.
