The Minister of Railways, Dinesh Trivedi, presented the Railways Budget 2012 to Parliament on 14th March.  While commenting on the financial position of Railways, the Minister said that 'the Indian Railways are passing through a difficult phase'. The Operating Ratio for the closing year is now estimated to equal 95%. This is significantly higher than the 91.1% figure budgeted last year. Operating Ratio is a metric that compares operating expenses to revenues. A higher ratio indicates lower ability to generate surplus. Surplus is used for capital investments such as laying of new lines, deploying more coaches etc. Therefore, a smaller surplus affects the Railway’s capability to make such investments. Budget v/s Revised estimates 2011-12 Budget 2011-12 had estimated the performance of Railways for the financial year. Revised estimates have now been submitted. Taken together, these two figures help in comparing actual performance against targets. Some observations are enumerated below:

  • Total receipts decreased by Rs 2,746 crore.
  • Total expenditure increased by Rs 2,102 crore.
  • Operating Ratio increased from 91.1% to 95%. This implies a decrease in surplus.
  • Appropriations to the ‘Development Fund’ and the ‘Capital Fund’ decreased from Rs 5,258 crore to Rs 1,492 crore (a decrease of 72%). The ‘Development Fund’ finances expenditure such as passenger amenities; the ‘Capital Fund’ is used for capital augmentation such as laying of new lines.

Budget estimates 2012-13 In 2012-13, Railways plan to improve Operating Ratio to 84.9% and to increase surplus to Rs 15,557 crore. This is more than 10 times the surplus generated in 2011-12 (Revised Estimates). The effective increase in freight rates is estimated to average 23%. During this time, passenger fares are also estimated to increase by an effective average rate of 19%. [1] Infrastructure Performance during the 11th Plan Under the 11th Five Year Plan, the total plan expenditure for Railways had been approved at Rs 2,33,289 crore. The Outcome Budget shows that the actual expenditure is only likely to be Rs 1,92,291 crore. Thus, expenditure will fall short by Rs 40,998 crore. This gaps exists despite a significant increase in the Gross Budgetary Support approved by Parliament. Plan expenditure during 2007-12 (In Rs Crore)

 

Approved Expenditure

Actual Expenditure

Gross Budgetary Support

63,635

75,979

Internal Resources

90,000

67,763

Extra Budgetary Support

79,654

48,549

Total

2,33,289

1,92,291

The Standing Committee on Railways, in its 11th report presented in August 2011, had sought an explanation from the Ministry. According to the Ministry, lower mobilization of internal resources and lack of extra budgetary support are the main reasons for the shortfall.  Internal resource mobilization has been low because of (i) impact of the 6th Pay Commission; and (ii) slow growth in freight earnings due to the economic slowdown. Extra budgetary resources have been low due to non-materialization of funds through the Public-Private Partnership route. Proposals for the 12th Plan Two recent committees – Kakodkar Committee on Railway Safety and the Pitroda Committee on Railway Modernization – have called for large investments in the next five years. The Kakodkar Committee has recommended an investment of Rs 1,00,000 crore in the next five years to improve safety; the Pitroda Committee has recommended an expenditure of Rs 3,96,000 crore in the next five years on modernization. The Railway sub-group of the 12th Five Year Plan has also estimated a requirement of Rs 4,42,744 crore for various other investments proposed to be undertaken during the Plan period. [2] All three groups have called for significant investments in infrastructure augmentation in the next five years. Budget proposals 2012-13 According to the Minister’s speech, the Annual Plan outlay for the year 2012-13 has been set at Rs 60,100 crore. The plan would be financed through:

  • Gross Budgetary Support of Rs 24,000 crore
  • Railway Safety Fund of Rs 2,000 crore
  • Internal Resources of Rs 18,050 crore
  • Extra Budgetary Resources of Rs 16,050 crore. Of this, Rs 15,000 crore would be borrowed from the market through IRFC (Indian Railway Finance Corporation).

What happens now? The Budget is likely to be discussed in the two Houses within the next few days.  Post the discussion, the Ministry's proposals will be put to vote.  Once passed, the Ministry can put its proposals into action. For more details on the Railway Budget, including the projects proposed this year and the status of proposals made last year, please see our analysis here. To understand some of the challenges faced by the Indian Railways, see our blog post from last year. Notes: [1] The ‘effective average fare’ has been calculated by dividing the total income from the segment (freight/ passenger) by the total traffic (in NTKM/ PKM).  This would vary with changes in fares as well as the usage by different categories of users (including the proportion of tickets booked through Tatkal). [2] Source: Report of the Expert Group on Railway Modernization (Chairman: Sam Pitroda)

The Union government’s Cabinet Committee on Security recently gave clearance to the Home Ministry’s NATGRID project.  The project aims to allow investigation and law enforcement agencies to access real-time information from data stored with agencies such as the Income Tax Department, banks, insurance companies, Indian Railways, credit card transactions, and more.  NATGRID, like a number of other government initiatives (UIDAI), is being established through governmental notifications rather than legislation passed in Parliament.  The examination of this issue requires an assessment of the benefits of legislation vis-a-vis government notifications. Government notifications can be issued either under a specific law, or independent of a parent law, provided that the department issuing such notification has the power to do so.  Rules, regulations which are notified have the advantage of flexibility since they can be changed without seeking Parliamentary approval. This advantage of initiating projects or establishing institutions through government notifications is also potentially of detriment to the system of checks and balances that a democracy rests on.  For, while legislation takes a longer time to be enacted (it is discussed, modified and debated in Parliament before being put to vote), this also enables elected representatives to oversee various dimensions of such projects.  In the case of NATGRID, the process would provide Parliamentarians the opportunity to debate the conditions under which private individual information can be accessed, what information may be accessed, and for what purpose.  This time consuming process is in fact of valuable import to projects such as NATGRID which have a potential impact on fundamental rights. Finally, because changing a law is itself a rigorous process, the conditions imposed on the access to personal information attain a degree of finality and cannot be ignored or deviated from.  Government rules and regulations on the other hand, can be changed by the concerned department as and when it deems necessary.  Though even governmental action can be challenged if it infringes fundamental rights, well-defined limits within laws passed by Parliament can help provide a comprehensive set of rules which would prevent their infringement in the first place. The Parliamentary deliberative process in framing a law is thus even more important than the law itself.  This is especially so in cases of government initiatives affecting justiciable rights.  This deliberative process, or the potential scrutiny of government drafted legislation on the floor of Parliament ensures that limitations on government discretion are clearly laid down, and remedies to unauthorised acts are set in stone.  This also ensures that the authority seeking to implement the project is The other issue pertains to the legal validity of the project itself.  Presently, certain departmental agencies maintain databases of personal information which helps them provide essential services, or maintain law and order.  The authority to maintain such databases flows from the laws which define their functions and obligations.  So the power of maintaining legal databases is implicit because of the nature of functions these agencies perform.  However, there is no implicit or explicit authorization to the convergence of these independent databases. One may argue that the government is not legally prevented from interlinking databases.  However, the absence of a legal challenge to the creation of NATGRID does not take away from the importance of establishing such a body through constitutionally established deliberative processes.  Therefore, the question to be asked is not whether NATGRID is legally or constitutionally valid, but whether it is important for Parliament to oversee the establishment of NATGRID. In October 2010, the Ministry of Personnel circulated an “Approach paper for a legislation on privacy”.  The paper states: “Data protection can only be ensured under a formal legal system that prescribes the rights of the individuals and the remedies available against the organization that breaches these rights. It is imperative, if the aim is to create a regime where data is protected in this country, that a clear legislation is drafted that spells out the nature of the rights available to individuals and the consequences that an organization will suffer if it breaches these rights.” As the lines above exemplify, it is important for a robust democracy to codify rights and remedies when such rights may be potentially affected.  The European Union and the USA, along with a host of other countries have comprehensive privacy laws, which also lay down conditions for access to databases, and the limitations of such use.  The UIDAI was established as an executive authority, and still functions without statutory mandate.  However, a Bill seeking to establish the body statutorily has been introduced, and its contents are being debated in the Parliamentary Standing Committee on Finance and the Bill has also been deliberated on by civil society at large. A similar approach is imperative in the case of NATGRID to uphold the sovereign electorate’s right to oversee institutions that may affect it in the future.