The Comptroller and Auditor General of India (CAG) submitted its audit report on finances of the Indian Railways in December 2019. The report provides an evaluation of the financial performance of Railways in the year 2017-18. It analyses the impact of concessions allowed to passengers on earnings and effectiveness of the mechanism in place to check the misuse of concessions. CAG made the following observations and recommendations:
Trends in expenditure: In 2017-18, the total expenditure by Railways was Rs 2.8 lakh crore, an increase of 4% over the previous year. This comprises revenue expenditure of Rs 1.8 lakh crore (64%) and capital expenditure of Rs one lakh crore (36%). While revenue expenditure increased by 10%, capital expenditure decreased by 6% between 2016-17 and 2017-18. Salaries and pensions of staffs formed the bulk of working expenses of Railways (67%).
Trends in receipts: Major sources of receipts for Railways in 2017-18 were: (i) internal resources (64%), (ii) extra-budgetary resources such as borrowings and investment through public-private partnership (20%), and (iii) budgetary support provided by the central government (16%). Earnings from internal resources comprise: (i) earnings from transportation of goods, (ii) earnings from traffic of passengers, and (iii) sundry earnings which includes renting and leasing of buildings, catering services, advertisement, and reimbursement of losses on strategic lines. In 2017-18, freight earnings and passenger earnings contributed 42% and 18% of the total receipts, respectively.
Receipts from internal resources in 2017-18 was Rs 1,78,930 crore, an increase of 8.1% over the previous year. During this period, the freight earnings and passenger earnings increased by 12% and 5%, respectively. However, sundry earnings decreased by 16% during the same period.
Decline in revenue surplus: In 2017-18, net revenue surplus of Railways was Rs 1,666 crore. This is a decrease of 66% over the revenue surplus in 2016-17 (Rs 4,913 crore). CAG observed that Railways would have ended up with a revenue deficit of Rs 5,676 crore in 2017-18. However, it received advances worth Rs 7,342 crore for the financial year 2018-19 which was accounted as income in 2017-18, thereby reducing the actual deficit.
Increase in Operating Ratio: Operating ratio is the percentage of working expenses to traffic earnings. The Operating Ratio was 98.44% in 2017-18, the highest in the last 10 years. This implies that the operational performance of Railways has deteriorated. If advances for 2018-19 were not included in receipts, the operating ratio for 2017-18 would have been 102.66%.
Financing of capital expenditure: In 2017-18, capital expenditure was financed by internal resources (3%), budgetary support (43%), and extra-budgetary resources (54%). Share of internal resources in financing capital expenditure was 26% in 2014-15 which decreased to 3% in 2017-18. Railways set a target to raise extra-budgetary resources worth Rs 1.5 lakh crore in five years (2015-20). Of this, Railways could raise Rs 37,360 crore (25%) as of 2017-18. The amount raised has been less than the amount estimated in all the three years since 2015-16. Further, Railways could not spend the funds raised from extra-budgetary resources fully in 2016-17 and 2017-18.
Cross subsidisation of passenger services: In 2016-17, passenger and other coaching services incurred losses of Rs 37,937 crore, whereas freight operations made a profit of Rs 39,956 crore. Almost 95% of profit earned from freight operations was utilised to compensate for the loss from passenger and other coaching services.
Appropriation to Railways Funds: The decline in revenue surplus led to a decline in appropriation to the various funds managed by Railways from its internal resources. In 2017-18, of the estimated allocation of Rs 5,000 crore for the Depreciation Reserve Fund, Rs 1,540 crore was allocated (31%). The value of over-aged assets pending for replacement using this fund was estimated at Rs 1,01,194 crore at the end of 2017-18. In the same year, of the estimated allocation of Rs 5,000 crore for the safety fund, the Rashtriya Rail Sanraksha Kosh, Rs 1,100 crore was allocated (22%).
Impact of concessions on receipts: Between 2015-18, 11% of the passengers availed various types of concessions (concessions to senior citizens and privilege pass given to employees). Such concessions amounted to 8% of reserved passenger earnings. CAG observed that Railways has not taken adequate steps to contain the burden of concession. It recommended that Railways should rationalise concessions and make procedural improvements to check their misuse.
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To facilitate the setting up industrial parks, the Council has decided that all entities with 20% ownership by central or state governments will be exempt from GST payable for long-term land leases from January 1, 2020. Earlier, only entities with a 50% government stake were exempt.
Why do we need a GST Council? The predominant responsibility of the GST Council is to ensure to have one uniform tax rate for goods and services across the nation. It is the key decision-making body that will take all important decisions regarding the GST. It dictates tax rate, tax exemption, the due date of forms, tax laws, and tax deadlines, keeping in mind special rates and provisions for some states.
How is the GST Council structured? The Goods and Services Tax (GST) is governed by the GST Council. Article 279 (1) of the amended Indian Constitution states that the GST Council has to be constituted by the President within 60 days of the commencement of the Article 279A.
Composition: According to the article, GST Council will be a joint forum for the Centre and the States. It consists of the following members: The Union Finance Minister will be the Chairperson As a member, the Union Minister of State will be in charge of Revenue of Finance The Minister in charge of finance or taxation or any other Minister nominated by each State government, as members.
GST Council recommendations: Article 279A (4) specifies that the Council will make recommendations to the Union and the States on the important issues related to GST, such as, the goods and services will be subject or exempted from the Goods and Services Tax.
Contributions of India Peacekeepers: The soldiers were particularly praised for their efforts to support peace talks between Government and Opposition forces in the Upper Nile region and establishing the first-ever UNMISS base on the west bank of the Nile at Kodok.
Outside of their duties, the peacekeepers have also supported local communities by building veterinary hospitals at Kodok and Malakal, training cattle-keepers to better care for their livestock and provided life-saving medical assistance to people in need.
Background: India has been the largest troop contributor to UN missions since inception. So far India has taken part in 49 Peacekeeping missions with a total contribution exceeding 2,45,000 troops and a significant number of police personnel have been deployed.
For Prelims and Mains: What is peacekeeping? It’s significance? United Nations Peacekeeping was created in 1948. Its first mission involved the establishment of the UN Truce Supervision Organization (UNTSO), which served to observe and maintain ceasefire during the 1948 Arab-Israeli War.
Significance and the need for peacekeeping: United Nations Peacekeeping helps countries torn by conflict create conditions for lasting peace. Peacekeeping has proven to be one of the most effective tools available to the UN to assist host countries navigate the difficult path from conflict to peace. Peacekeeping has unique strengths, including legitimacy, burden sharing, and an ability to deploy and sustain troops and police from around the globe, integrating them with civilian peacekeepers to advance multidimensional mandates.
UN Peacekeeping is guided by three basic principles: Consent of the parties. Impartiality Non-use of force except in self-defence and defence of the mandate.
Global partnership: UN peacekeeping is a unique global partnership. It brings together the General Assembly, the Security Council, the Secretariat, troop and police contributors and the host governments in a combined effort to maintain international peace and security. Its strength lies in the legitimacy of the UN Charter and in the wide range of contributing countries that participate and provide precious resources.
About United Nations Mission in South Sudan: On 9 July 2011 South Sudan became the newest country in the world. The birth of the Republic of South Sudan is the culmination of a six-year peace process which began with the signing of the Comprehensive Peace Agreement (CPA) in 2005.
However, the Security Council determined that the situation faced by South Sudan continued to constitute a threat to international peace and security in the region and established the United Nations Mission in the Republic of South Sudan (UNMISS) to consolidate peace and security and to help establish conditions for development.
Following the crisis which broke out in South Sudan in December 2013, the Security Council reinforced UNMISS and reprioritized its mandate towards the protection of civilians, human rights monitoring, and support for the delivery of humanitarian assistance and for the implementation of the Cessation of Hostilities Agreement.
It will be developed by Tripura Industrial Development Corporation (TIDC) Ltd. for the industries based on rubber, textile and apparel, bamboo and agri-food processing.
What are SEZs? Special Economic Zones (SEZs) are geographically delineated ‘enclaves’ in which regulations and practices related to business and trade differ from the rest of the country and therefore all the units therein enjoy special privileges.
The basic idea of SEZs emerges from the fact that, while it might be very difficult to dramatically improve infrastructure and business environment of the overall economy ‘overnight’, SEZs can be built in a much shorter time, and they can work as efficient enclaves to solve these problems.
Facilities and incentives for SEZs: Duty-free import/domestic procurement of goods for development, operation and maintenance of SEZ units. Income tax exemption on export income for SEZ units under the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years. Exemption from Minimum Alternate Tax (MAT). Single window clearance for Central and State level approvals.
Concerns with present SEZ: SEZs in India have not been as successful as their counterparts in many other countries. Several Asian economies, particularly China, Korea, Malaysia, and Singapore, have greatly benefitted from these zones. Most of India’s new generation SEZs came up not for exporting, but for avoiding taxes. Large fiscal sops, in the form of a bunch of reliefs from central and state taxes, lured developers into building SEZs.
Most manufacturing SEZs in India have performed below par due to their poor linkages with the rest of the economy. Weak connections of coastal SEZs with their hinterlands inhibited these zones from utilising their full potential. States did not match the central SEZ Act with State-level legislation, which rendered the single window system ineffective. Lack of a robust policy design, efficient implementation and effective monitoringhave seriously jeopardised India’s effort to industrialise through SEZs.
Why? National Projects are provided Central grant of 90% of the estimated cost for their completion in a time bound manner.
What’s the project? The Kaleshwaram project is an off-shoot of the original Pranahitha-Chevella Lift Irrigation Scheme. It is on the Godavari River. The Centre under the Andhra Pradesh Reorganisation Act, 2014 is mandated to support programmes for the development of backward areas in the successor States, including expansion of physical and social infrastructure.
Impact: The Kaleshwaram project has provision for the storage of about 148 tmc ft with plans of utilising 180 tmc ft by lifting at least 2 tmc ft water every day for 90 flood days. The project is designed to irrigate 7,38,851 hectares (over 18.47 lakh acres) uplands in the erstwhile districts of Karimnagar, Nizamabad, Warangal, Medak, Nalgonda and Ranga Reddy.
What’s unique? According to engineers, KLIP has many unique features, including the longest tunnel to carry water in Asia, running up to 81 km, between the Yellampally barrage and the Mallannasagar reservoir. The project would also utilise the highest capacity pumps, up to 139 MW, in the country to lift water.
Context: Sahitya Akademi announced its annual Sahitya Akademi Awards in 23 languages.
About Sahitya Akademi Award: It is a literary honour that is conferred annually on Indian writers for their outstanding works of literary merit. It was established in 1954. The award consists of a casket containing an engraved copper-plaque (designed by film-maker Satyajit Ray), a shawl and cheque of Rs.1 Lakh.
Context: The Odisha unit of the CPI(M) has demanded that the State government immediately start providing patta or documented land rights to the tribal inhabitants of ‘Swabhiman Anchal’, the erstwhile cut-off area of the Balimela reservoir.
Key facts: The Balimela Reservoir is on the river Sileru which is situated in the Maikangiri District of Odisha State.
The Sileru (also known as the Machkund River) rises in the Eastern Ghats in Andhra Pradesh state and flows northward into Jalaput Reservoir on the border with Odisha state. The Sileru empties into the Sabari River in Chhattisgarh. Sabari river is a tributary ofGodavari.
Context: Portugal announces Gandhi Citizenship Education Prize.
It will be dedicated to social welfare. This would be an award given annually and the first edition will be dedicated to animal welfare.
Context: The indigenously developed Pinaka Guided Weapons System was successfully test fired at Pokhran desert in Rajasthan.
Pinaka rocket systems are developed by Defence Research and Development Organisation (DRDO). The rocket system was named after Pinaka, the bow of Lord Shiva. It was initially a 30 to 40 km range rocket. Its range was increased 70 to 80 km with Pinaka Mark II.
Context: RBI to carry out US-style ‘Operation Twist’ to bring down interest rates.
‘Operation Twist’ is when the central bank uses the proceeds from sale of short-term securities to buy long-term government debt papers, leading to easing of interest rates on the long term papers.