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Presented By

G.S.Murthy, IRAS.,

Venue: C-TARADate: 20th November, 2015

Social Service Obligation -

Indian Railways

Social costs- Definition

When assessing the overall impact of its commercial actions in terms of social costs, a socially responsible business operator  should take into account its own production expenses, as well as any indirect expenses or damages borne by others.

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SOCIAL COSTS – INDIAN RAILWAYS – WHY ?

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To carry out certain transport activities which are essentially

uneconomic in nature in the larger interest of the economically

disadvantaged sections of the society.

Losses incurred on this account fall under Social Service Obligation of

IR.

TOTAL IMPACT OF SOCIAL COSTS IN 2013-14

Total social costs – Rs. 32120 Crores.

Out of which, Rs. 4287 crores pertains to Staff welfare cost and Rs.2947 crores pertains to Law & Order 4

1.Passenger and Other Coaching

services

2.Operation of Uneconomic Branch Lines

3.Essential Commodities carried

below cost

4.New Lines opened for

Traffic during the last 15 years

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Social Costs – Four elements

Losses on transporta-tion of Essential

Commodities carried below the cost -; 53

Uneconomic Branch Lines -; 1681

Losses on Passenger and Other Coaching

services; 320676

1.PASSENGER AND OTHER COACHING SERVICES

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Overall loss is Rs.32,067 Crores.

Out of which, Net suburban losses in Chennai, Kolkata, Mumbai & Secunderabad – Rs.4,132 Crores

Not enhancing the fares in the backdrop of the inflationary pressures prevalent in the economy is the main reason.

1.PASSENGER AND OTHER COACHING SERVICES

Low Second class ordinary fares (sub & non sub)

80 % of total traffic but provide only 18% of total

passenger earnings.

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1.PASSENGER AND OTHER COACHING SERVICES

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Suburban

Non suburban

Total

Total (all classes)

2nd class ordinary

% Total (all classes)

2nd class ordinary

% Total (all classes)

2nd class ordinary

%

No of passengers (in millions)

4552 4286 94 % 3844 2413 63 % 8397 6699 80 %

Passenger earnings (In Crs of Rs.)

2260 1966 87 % 34217

4749 14 % 36532

6715 18 %

1.PASSENGER AND OTHER COACHING SERVICES

Season tickets – Non suburban

22 % of Total Non suburban traffic

But provides only 1 % of Earnings

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1.PASSENGER AND OTHER COACHING SERVICES

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Non -Suburban

Total (all classes)

Season Tickets

%

No. of passengers (in millions)

3845 860 22%

Passenger earnings ( In Crs of Rs.)

34272 4334 1 %

1.PASSENGER AND OTHER COACHING SERVICES

Season tickets – Suburban

62 % of total traffic but provide only

meager 40 % of total passenger earnings.

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1.PASSENGER AND OTHER COACHING SERVICES

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Suburban Total (all classes)

Season Tickets

%

No. of passengers (in millions)

4552 2843 62 %

Passenger earnings ( In Crs of Rs.)

2261 921 40 %

CONCESSIONSRecipients of Gallantry awards

National sports awards

Best Teachers with National awards

Shram awardees

War widows 14

CONCESSIONSCancer, TB patients

Handicapped persons

Press Correspondents

Film technicians 15

CONCESSIONS

Military traffic Postal traffic

Newspapers & magazines

Traffic to North east

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CONCESSIONSTransporting materials

like water, food, fodder etc to areas affected by natural

disasters like drought , cyclone,

earthquake etc17

2. OPERATION OF UNECONOMIC BRANCH LINES

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The Branch lines which do not earn profits are termed as Uneconomic Branch Lines or un remunerative Branch Lines .

As on date 90 uneconomic branch lines existed

On an original investment of Rs.2,617 Crores on Uneconomic Branch lines, the losses during the year 2013-14 amounted to Rs. 1,681 crore.

2. OPERATION OF UNECONOMIC BRANCH LINES

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The Railway Reforms Committee recommended closure of 40 such lines.But due to stiff public resistance and opposition by State Governments towards withdrawal of such services, only 15 lines have been closed permanently by the Railways

3. LOSSES ON TRANSPORTATION OF ESSENTIAL COMMODITIES CARRIED BELOW COST:

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Certain essential commodities of mass consumption like fruits and vegetables, sugarcane, paper, charcoal, bamboos, cotton raw pressed etc. are carried below the cost of operation in order to contain their market prices.

However marginal loss only on account of this

works out to Rs. 53 Crores during 2013-14.

These commodities constitute 0.71 % of the total revenue NTKMs and

0.28 % of freight earnings in the year

2013-14

3. LOSSES ON TRANSPORTATION OF ESSENTIAL COMMODITIES CARRIED BELOW COST: TOTAL – 53.31 CRORES

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13.21

1.57 0.790.52 0.18Rs.in Crores

Fruits & veg-etablesBamboosCharcolCotton Raw pressedSugarcaneCotton manufac-tured

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4. NEW LINES OPENED FOR TRAFFIC DURING THE LAST 15 YEARS:

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The Railway Convention Committee (RCC) in its 9th Report on this subject has noted that in the present state of Railway finances and prevalent high costs of construction, the Railways are not in a position to inject adequate capital investment in under-developed areas.

4. NEW LINES OPENED FOR TRAFFIC DURING THE LAST 15 YEARS:

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Therefore, they have felt that reliefs like making available land free of

cost and waiver of dividend payment on

such lines for a minimum period of twenty years

are justified.

4. NEW LINES OPENED FOR TRAFFIC DURING THE LAST 15 YEARS:

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Periodic reviews have revealed that of the 4 linesexamined in 2013-14, as part of Social Service

Obligations ofthe Railways for development of backward areas, all

lines areshowing either negative or unremunerative returns

FINANCIAL RESULTS OF NEW LINES FOR THE YEAR 2013-14

Name of the branchline

Date ofopening

Cost(` incrore)

Expected return on investment

Actual return on investment(%)

2011-12 2012-13 2013-14

Kolayat-Phalodi(BG)112Kms.

2007 170.77 (-) 3.06 (-) 10.31 (-) 13.44 (-)13.14

Kakinada-Kotipali (BG)44.7 Kms.

2005 153.58 19.87 (-) 9.00 (-) 7.00 (-) 1.0025

FINANCIAL RESULTS OF NEW LINES FOR THE YEAR 2013-14

Name of the branchline

Date ofopening

Cost(` incrore)

Expected return on investment

Actual return on investment(%)

2011-12 2012-13 2013-14

Penukonda-Dharmavaram 43 kms

2002 64.50 14.14 (-) 31.15 (-)37.80 (-) 39.98

Lanjigarh-Bhawanipatna-Junagarh 54.5 Kms

2012 229.60 NA - (-) 3.65 (-) 5.5626

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CSR – CORPORATE SOCIAL RESPONSIBILITY

CSR

Activities of reduction of

poverty, education, health,

environmental sustainability,

gender equality, vocation skills etc

2 % of the average net profits of the last 3 years.

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RAILWAYS PSUS - CSR

Railways wish to use CSR funds of Railway PSUs such as CONCOR, IRCTC, IRCON,

RITES & RVNL

For utilising the CSR amounts to upgrade

passenger amenities in major stations such as

Mumbai, Howrah, New Delhi, Guwahati, Patna, Varanasi,

Vadodara, Chennai, Agra and Bengaluru.

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COMPENSATION FOR SOCIAL SERVICE OBLIGATIONS IN OTHER COUNTRIES:

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In many countries, the Government is

compensating to the Railways towards the loss on account of Social costs

COMPENSATION FOR SOCIAL SERVICE OBLIGATIONS IN OTHER COUNTRIES:

Compensation for losses on account of concessional tariffs

Out-right grant to cover deficits

Soft loans to meet the deficits 31

COMPENSATION FOR SOCIAL SERVICE OBLIGATIONS IN OTHER COUNTRIES:

Financial support to maintain viability of the system and to earn marginal profits;Writing off of accumulated debts and unproductive capital i.e., capital amortisationSupport for investment and infrastructure maintenance 32