Infrastructure: Energy, Ports, Roads, Airports, Railways etc.
Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Public transport: Overwhelming Needs but Limited Resources
In 2014-15, India added nearly 20 million vehicles, mainly two-wheelers, but also two million cars, vans and so on to the existing 172 million registered motor vehicles. Several million more have been added since, as public transport remains inadequate.
Personal transport has now reached saturation limit in the cities, resulting in gridlock, rising air pollution, lost productivity and ill-health
The Union Budget for 2016-17 has made a timely intervention at such an inflection point, with the move to expand the public transport system.
The Motor Vehicles Act is to be amended to open up the passenger segment, and more entrepreneurs will be able to operate bus services. Budget talks of greater investment, employment and multiplier effects for the economy stemming from such a move.
What is the role of public transport in Indian economy?
Public transport is an important part of India’s economy. Since the economic liberalization of the 1990s, infrastructure development has progressed rapidly; today there are a variety of modes of transport by land, water and air. However, India’s relatively low GDP per capita has meant that access to transport has not been uniform.
Public transport remains the primary mode of transport for most of the population, and India’s public transport systems are among the most heavily used in the world.
The demand for transport infrastructure and services has been rising by around 10% a year with the current infrastructure being unable to meet these growing demands.
In general, the larger the city size, the higher the percentage of urban trips served by public transport in India: 30 percent in cities with population between 1 and 2 million, 42 percent for cities with populations between 2 and 5 million, and 63 percent for cities with populations over 5 million . Thus, the especially rapid growth of large cities suggests a further rise in future demands for public transport in India.
The Crisis of Public Transport in India:
The rapid growth of India’s urban population has put enormous strains on all transport systems.
Travel demand far exceeds the limited supply of transport infrastructure and services.
Public ownership and operation of most public transport services has greatly reduced productivity and in?ated costs. India’s cities desperately need improved and expanded public transport service.
Unfortunately, meager government ?nancial assistance and the complete lack of any supportive policies, such as tra?c priority for buses, place public transport in an almost impossible situation.
Perhaps most important, the lack of ?nancial resources prevents necessary investments in maintaining and upgrading existing bus and rail systems and building new ones. Likewise, many advanced technologies long available in Western Europe are simply not a?ordable in most developing countries.
Public transport systems in the Third World are plagued by chronic corruption and ine?ciency, overcrowded and undependable service, congested roadways that slow down buses, and an operating environment that is often chaotic and completely uncoordinated.
Those problems of public transport occur within the broader context of daunting urban transport problems in general.
Trends in Population and Land Use
The rapid growth of India’s urban population—as in other developing countries—has generated an enormous need for e?cient public transport services to carry high volumes of passengers through dense, congested urban areas.
Since large cities are far more dependent on public transport than small cities, the need for public transport services has increased faster than overall population growth.
Lack of e?ective planning and land-use controls has resulted in rampant sprawled development extending rapidly in all directions, far beyond old city boundaries into the distant countryside. That also has greatly increased the number and length of trips for most Indians, including those by public transport.
Moreover, local governments have permitted scattered commercial and residential development in outlying areas without the necessary infrastructure such as roads, utilities, hospitals, shopping, and schools. That generates long trips between residences and almost all other trip destinations. Just as in North America, most new commercial development is in the distant suburbs. For example, Tidal Park is a software center on the outskirts of Chennai; Gurgaon is a large new industrial area outside Delhi. Similarly, Bangalore is planning several technology parks on its fringe as well as several circumferential highways in the suburbs, both of which will induce further decentralization.
What are the challenges and problems?
Air pollution, noise, congestion, and tra?c fatality levels are often much more severe than those of developed countries.
In fact, many city residents are so poor that they cannot a?ord even low fares, and routes are not designed to serve the poor at any rate. Thus, the poor in developing countries su?er even more than those in the Western World from low levels of mobility and accessibility, especially to jobs.
With 23 percent of its urban population living in poverty, India has been forced to keep its public transport fares extremely low. That has sharply restricted the operating revenues of all public transport systems, making it di?cult to a?ord even routine maintenance and vehicle replacement, let alone system modernization and expansion.
The ?nancial problems stemming from India’s low per-capita income are probably the most important challenges facing Indian public transport, but there are many others as well: ine?ciency, roadway congestion, tra?c accidents, lack of planning, overcrowding, noise, and total lack of coordination of any kind.
Another crucial problem of Indian transport is ine?ciency, lack of productivity, oversta?ng, excessively high operating costs, and large subsidy needs.
Clearly, much could be done to improve the e?ciency of both bus and rail operations, most of which are publicly owned, operated, and regulated. There are many institutional obstacles to any fundamental changes, including powerful labor unions representing employees, which have blocked changes that would disadvantage them.
The heavy, high ?oor buses currently in service in most cities are noisy, polluting, fuel-ine?cient, and unsafe. They are built on truck chassis with such high ?oors that boarding is slow and di?cult. Moreover, they have slow acceleration as well as poor fuel economy due to their weight, and are inappropriate to urban use.
Regulation is often seen as the obstacle that has affected the growth of bus transport. Yet, a scheme of the kind that the Budget proposes cannot run without a sound regulatory framework, if the goal is to remove erstwhile monopolies and introduce greater competition even in those States where private provision in urban and inter-city services already exists
Optimally, a system should lay down standards, identify areas of operation, fix prices and enable participation by entrepreneurs.
The main problem in Indian cities, however, is ?nancial. To some extent, operating revenues of public transport ?rms could be greatly enhanced by targeting fare subsidies to low-income passengers and raising considerably the fares for the middle and upper classes.
Fares on most systems are extremely low and passenger volumes are extremely high so that even modest increases might yield substantial revenues for system maintenance, modernization, and expansion.
Fares cannot be raised too high, however, even among middle-class riders, since they might then be diverted to private transport modes, which cause the most urban transport problems. Thus, larger subsidies from the public sector will be essential.
Since passenger revenues do not cover the full costs of operation and capital investment of public transport, government ?nancial assistance is obviously crucial. As owner of Indian Railways, the Central Government must bear whatever operating de?cit remains after the substantial cross-subsidies from pro?table freight services.
The World Bank, the Japanese Bank for International Cooperation (JBIC), and other international lending agencies have also provided loans for large infrastructure projects. For example, a JBIC loan is funding two-thirds of the capital cost of building the Delhi Metro (Delhi Metro Rail 2003).
Most bus services are still publicly owned and operated by STUs (State Transport Undertakings), whose operating and capital investment costs are covered by a combination of state and local government subsidies, grants, and loans that vary from state to state.
Signi?cantly, no government level has any dedicated taxes whose proceeds would be automatically earmarked for public transport. Thus, ?nancial support for public transport is tenuous, depending on annual budgetary appropriations.
Safety of passengers:
Tens of thousands of public transport passengers are killed or injured every year in accidents.
Many buses and trams do not even have doors and windows that can be closed, and that only encourages passengers to ride by protruding from inside the vehicle or by hanging on from outside.
Clearly, riding on the roofs or sides of buses and trains is inherently unsafe and results directly from the severe under capacity of public transport systems in India.
What needs to be done to make public transport more effective and efficient?
The law enabling State road transport undertakings dates back to 1950, and many States have failed to progressively augment their operations after opting for full or partial nationalization, especially in the cities. Private operators, on the other hand, have rapidly increased their share of the total number of buses. The Budget proposal to open up the sector has the potential to reverse the effects of the neglect and obsolescence.
Equally important, state and local governments must give tra?c priority to buses, both through special bus lanes and signal priority over private transport.
With more than 90 percent of public transport passengers in Indian cities relying on buses, it is especially important to upgrade bus services through modern, safe vehicles and priority on the congested roadways.
Buses are also unpopular because they are not ergonomically designed as per the national bus code. A renaissance in bus services is possible, but not without modern design standards and service-level benchmarking that are ensured through strict enforcement.
Encouraging private sector:
On the question of encouraging private sector participation in bus services, the experience of London is worth studying: routes are tendered as per schedules, fares are fixed by the city government, and buses are run by franchisee operators who are paid according to mileage.
What stands out in this model is the use of intelligent transport systems — of the kind the new taxi companies in India use — to determine whether the contractor is adhering to schedules, and to analyze demand-supply patterns. For passengers, they provide efficient real-time service information.
Selective privatization of India’s public transport sector:
This could be done either through opening up the market to private ?rms (who would own, manage, operate and ?nance their own systems) or by having public agencies contract with private ?rms to operate services on a system wide basis, for selective routes, or for selected functions (like maintenance).
Rail systems have only rarely been privatized anywhere in the world (except for certain narrow functions), while there is considerable experience with bus privatization. Thus, privatization seems an option only for bus services, but they account for more than 90 percent of India’s public transport.
Privatization of public transport in India was strongly encouraged by the World Bank (2002), which accused publicly owned and operated systems of being inef?cient and highly unpro?table, providing insu?cient and low-quality services, and failing to respond to market demands.
Privatization in Bangalore and Hyderabad has so far been limited to the contracting out of certain routes to private operators, but still with the overall coordination of a public agency.
It appears that privatization does indeed have much potential to improve e?ciency, but that it must be accompanied by strict regulations, performance standards, and overall coordination to ensure an integrated network of services. In light of the transport funding crisis in Indian cities, they may have little choice but to seek the cost savings possible with privatization and increased competition.
Many buses do not even have closable windows and doors to protect passengers from the weather and from falling out of the vehicle. It is essential to replace these outdated buses with modern, safe, clean, and fuel-e?cient vehicles.
Improving and expanding rail systems is also crucial, since they are insulated from the congestion delays caused by roadway tra?c.
Connecting the dot:
Modernization and selective privatization of public transport play vital role in making public transport efficient. Comment?
Government policies and interventions for development in various sectors and issues arising out of their design and implementation.
General studies 3
Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Government Budgeting, Taxation & its impact
Political pursuit of a Pensioned Society
Stuck with informal jobs: 82 per cent of the workforce
Budget portrays a proper roadmap?
This shifting stance over taxing provident fund savings illustrates the lack of a clear road map
Illustrations of three different versions on how the tax would be implemented were put forth
Lacunae’s of the Past Budgets—
Welfare of Senior Citizens: 2014-15
Limited revival of the Varishtha Pension BimaYojana (VPBY)
‘Large amount of money’ lying as unclaimed amounts in Public Provident Fund, Post Office Saving Schemes and other such accounts- To set up a committee to examine how this amount can be used to protect and further financial interests of the senior citizens (Deadline: 6 months; Meeting: Twice)
Social security and welfare of employees serving in the organised sector:
Extended a minimum pension of Rs.1,000 for all members of the employees’ pension scheme run by the Employees’ Provident Fund Organisation (EPFO)
Raised the wage ceiling for mandatory Employees’ Pension Scheme (EPS) membership from Rs.6,500 per month to Rs.15,000 per month
Mandatory for all employees earning up to Rs.15,000 per month in firms employing over 20 workers
24 per cent of an employee’s salary (12 per cent as employee’s share and 12 per cent as employer’s share) is contributed to EPFO as a social security net for old age — a little over a third of that (8.33 per cent) is diverted to the EPS, with the government chipping in with a 1.16 per cent subsidy
2014-15: Put in an additional Rs.250 crore that year
Present: EPF savings will remain tax-free if three-fifths of the corpus is used to buy an annuity and get a monthly pension
Jan-Dhan to Jan Suraksha: 2015-16
Three new schemes as part of the government’s commitment so that no Indian citizen will have to worry about illness, accidents, or penury in old age
Creating a universal social security system for all Indians—
Pradhan Mantri Suraksha BimaYojana- Accidental death cover of Rs.2 lakhs at Rs.12 premium a year)
Atal Pension Yojana- Would give a fixed pension, with a limited co-contribution up to Rs.1,000 from the government
Pradhan Mantri Jeevan JyotiBimaYojana: Natural and accidental death risk cover of Rs.2 lakh at Rs.330 premium a year)
A scheme for providing physical aids and assisted living devices for senior citizens living below the poverty line
Senior Citizen Welfare Fund
About Rs.9,000 crore lying unclaimed in PPF and EPF accounts would be ‘appropriated’ to a new Senior Citizen Welfare Fund (violate the trust vested by investors in the trustees of these funds- illegal)
EPF and Employees’ State Insurance Corporation (ESIC)- Provides medical care to organised sector workers)
Caters to hostages, rather than clients
Workers with low incomes suffer on account of high statutory deductions to such schemes
Provide employees the option to leave the EPF and opt for the New Pension Scheme (NPS) launched by the Pension Fund Regulatory and Development Authority (PFRDA)
Employees below a certain level of monthly income could decide if they wanted to stop their own contributions (12 per cent of salary) to the EPF
Offered an option for workers to opt for a health insurance product instead of ESI
Report Card of NPS:
An additional tax sop of Rs.50,000 was given for investments beyond Rs.1.5 lakh that are tax deductible under Section 80C of the Income Tax Act
8 million new members joined the scheme and the corpus now stands at Rs.1.10 lakh crore from 11.5 million accounts
Issue: Law Ministry is still vetting the legislation to amend the EPF Act of 1952, while a draft Cabinet note is doing the rounds on amending the ESI Act of 1948
What about the above mentioned announcements—Still remain a non-starter
Towards a Pensioned Society- A Big Picture
Pensioned society- One of the nine new pillars for growth (with its failure to meet the desired goal of the previous budgets lurking in the backdrop)
The Way Ahead exists?
EPF savings, PPF and government employees PF should be taxed for true parity in tax treatment
The government can also work on bringing the EPFO under the Finance Ministry as well and put a fresh perspective in place to formulate a framework for payment of pensions to those who have no formal employment contracts and access to either of the two schemes
Connecting the Dots:
Will rationalising the statutory deductions from salaries (like EPF) work better than opting for a breakthrough social security system at once? Critically examine.