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The ongoing Monsoon Session of Parliament is being widely viewed as the 'make or break' session for passing legislation before the end of the 15th Lok Sabha in 2014. Hanging in balance are numerous important Bills, which will lapse if not passed before the upcoming 2014 national elections. Data indicates that the current Lok Sabha has passed the least number of Bills in comparison to other comparable Lok Sabhas. The allocated time to be spent on legislation in the Monsoon Session is also below the time recommended for discussion and passing of Bills by the Business Advisory Committee of the Lok Sabha. Eight out of a total of 16 sittings of the Monsoon Session have finished with only 15 percent of the total time spent productively. Success rate of the 15th Lok Sabha in passing legislation India’s first Lok Sabha (1952-1957) passed a total of 333 Bills in its five year tenure. Since then, every Lok Sabha which has completed over three years of its full term has passed an average of 317 Bills. Where a Lok Sabha has lasted for less than 3 years, it has passed an average of 77 Bills. This includes the 6th, 9th, 11th and 12th Lok Sabhas. The ongoing 15th Lok Sabha, which is in the fifth year of its tenure, has passed only 151 Bills (This includes the two Bills passed in the Monsoon Session as of August 18, 2013). In terms of parliamentary sessions, Lok Sabhas that have lasted over three years have had an average of fifteen sessions. The 15th Lok Sabha has finished thirteen parliamentary sessions with the fourteenth (Monsoon Session) currently underway. 
Legislative business accomplished in the 15th Lok Sabha For the 15th Lok Sabha, a comparison of the government's legislative agenda at the beginning of a parliamentary session with the actual number of Bills introduced and passed at the end of the session shows that: (i) on average, government has a success rate of getting 39 percent of Bills passed; and (ii) on average, 60 percent success rate in getting Bills introduced. 
The Monsoon Session of Parliament was scheduled to have a total of 16 sitting days between August 5-30, 2013. Of the 43 Bills listed for consideration and passage, 32 are Bills pending from previous sessions. As of August 18, 2013, the Rajya Sabha had passed a total of five Bills while the Lok Sabha had passed none. Of the 25 Bills listed for introduction, ten have been introduced so far. The Budget Session of Parliament earlier this year saw the passage of only two Bills, apart from the appropriation Bills, of the 38 listed for passing. These were the Protection of Women Against Sexual Harassment at Workplace Bill and the Criminal Law (Amendment) Bill. Time allocated for legislation in the Monsoon Session The Lok Sabha is scheduled to meet for six hours and the Rajya Sabha for five hours every day. Both houses have a question hour and a zero hour at the beginning of the day, which leaves four hours for legislative business in the Lok Sabha and three hours in the Rajya Sabha. However, both Houses can decide to meet for a longer duration. For example, Rajya Sabha has decided to meet till 6:00 PM every day in the Monsoon Session as against the normal working hours of the House until 5:00 PM. The Business Advisory Committee (BAC) of both Houses recommends the time that should be allocated for discussion on each Bill. This session's legislative agenda includes a total of 43 Bills to be passed by Parliament. So far, 30 of the Bills have been allocated time by the BAC, adding up to a total of 78 hours of discussion before passing. If the Lok Sabha was to discuss and debate the 30 Bills for roughly the same time as was recommended by the BAC, it would need a minimum of 20 working days. In addition, extra working days would need to be allocated to discuss and debate the remaining 13 Bills. With eight sitting days left and not a single Bill being passed by the Lok Sabha, it is unclear how the Lok Sabha will be able to make up the time to pass Bills with thorough debate.
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’.
