Вы находитесь на странице: 1из 26

General Knowledge Today

General Knowledge Today Railway and Union Budget 2016-17 Last Updated: March 14, 2016

Railway and Union Budget 2016-17

Last Updated: March 14, 2016

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Contents

Model Questions

3

Railway Budget 2016-17

4

Operating Ratio of Indian Railways

4

The contours of Nav Arjan, Nav Manak and Nav Sanrachana

5

SRESTHA & SUTRA: The New Research Wings of Railways

7

The Innovation Challenge for Start-ups

8

Avataran: The Seven Missions of Indian Railways

8

Other Proposals of Railway Budget 2016-17

10

Capacity Augmentation Proposals

10

Proposals for New Trains and Train Services

11

Other Proposals for Passengers

12

Proposals for Cleanliness

13

Farmers, Industry, Environment and Energy related Proposals

13

Staff Welfare Proposals

14

Proposals for North East and J&K

14

Union Budget 2016-17

15

The Nine Pillars of Modi-Jaitley Reform Agenda

15

Agriculture and Farmers Welfare

15

Rural Sector

16

Social Sector and Health Care

17

Education, Skills And Job Creation

17

Infrastructure and Investment

18

Financial Sector Reforms

18

Governance and Ease Of Doing Business

19

Fiscal Discipline

19

Tax reforms to reduce compliance burden

20

Short Notes / Observations from Budget

21

National Investment Grid

21

Simpli cation of Income-tax Act

21

Tax Exemption to Regulators

22

SAT Members, Benches Go Up

22

New Derivatives in Commodity Trading

22

Big projects for power and roads

22

Coal cess doubled

22

Amendment in the Companies Act

22

Tax breaks for the Newbies

22

For Women, Students and Dalits

23

Govt Moving Away from Guarantees?

23

NBFCs Get Much Needed Sop

23

More Bonds on the Way

23

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Towards Better Tax compliance of MNCs Ending Tax adventurism Tax budget for service providers goes up Service tax relief for patients Expected Revenue from Spectrum Subsidy Bill Aadhaar Single-Platform Social Security Delivery No More Chulhas

patients Expected Revenue from Spectrum Subsidy Bill Aadhaar Single-Platform Social Security Delivery No More Chulhas
patients Expected Revenue from Spectrum Subsidy Bill Aadhaar Single-Platform Social Security Delivery No More Chulhas
patients Expected Revenue from Spectrum Subsidy Bill Aadhaar Single-Platform Social Security Delivery No More Chulhas
patients Expected Revenue from Spectrum Subsidy Bill Aadhaar Single-Platform Social Security Delivery No More Chulhas
patients Expected Revenue from Spectrum Subsidy Bill Aadhaar Single-Platform Social Security Delivery No More Chulhas
patients Expected Revenue from Spectrum Subsidy Bill Aadhaar Single-Platform Social Security Delivery No More Chulhas
patients Expected Revenue from Spectrum Subsidy Bill Aadhaar Single-Platform Social Security Delivery No More Chulhas

23

24

24

24

24

24

25

25

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Model Questions

Prelims MCQ Topics

Operating Ratio, Nav Arjan, Nav Manak and Nav Sanrachana, SRESTHA & SUTRA, Seven Missions of Indian Railways, Antyodaya Express, Hamsafar, Tejas, UDAY train, Long Term Irrigation Fund and other terms used in Budget.

3

3

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway Budget 2016-17

The Railway Finances were a part of the Central Government Finances prior to 1924. On the basis of the Acworth Committee report (1920-21), the Railway Finances were separated from the general

government finances. This practice continues till date. Further, the finances of the Railways are determined by the Railway Convention committees since the Railway Convention 1950. The railway convention committees are appointed every 5 years by convention to review the finances of the Indian Railways, constitution and administration of the various railway funds including the Railway Revenue Fund, Railway Reservation Fund etc. The Railway Budget 2016-17 was presented with a theme Overcoming challenges Reorganize, Restructure Rejuvenate Indian Railways: Chalo, Milkar Kuch Naya Karen with three key objectives

viz. improving customer service, regaining the lost modal share and introducing new way of working by relooking the processes and structures. The three pillars of the strategy includeNav

Arjan {new revenues i.e. emphasis on generating highernon-tariff revenues}, Nav Manak {new

norms for getting more returns out of each rupee spent} and Nav Sanrachna {new structures}.

Operating Ratio of Indian Railways

The financial health of the railways is determined by its Operating Ratio (OR). Operating Ratio indicates how much railway spends to earn a rupee. An Operating Ratio of 90% means that Railway is spending 90 paisa to earn 100 paisa (i.e. one rupee). A lower figure of Operating Ratio is thus regarded better and is indicative of better financial health of the system. Operating Ratio can be decreased by reducing expenditure and augmenting income and efficiency. Income can be increased by raising fares and expanding its revenue streams. Raising passenger and freight fares are always politically sensitive issues. Historically, an Operating Ratio of Indian railway was not a problem in 1960s and 1970s. The best ever OR of Indian Railways was 74.7% in 1963-64. However, for the last few decades, this ratio is lingering between 92 to 98.5%. In 2014-15, the budgeted Operating Ratio was 92.5% against which it has been able to get some better position by achieving 91.3%. In 2015-16, the operating ratio is 90% mainly due to savings of Rs. 8,720 crore. However, for 2016-17, the government has targeted an O.R. of 92%.

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17
Railway and Union Budget 2016-17 The key reason for 2% increase in budgeted OR is the

The key reason for 2% increase in budgeted OR is the additional burdens of Rs. 21,000 crore on account of 7th pay commission. We note here that in 2008-09, when the railways had to implement the 6th Pay Commission report, the Operating Ratio had gone chaotic. In 2007-08, the OR was 75.9% due to good economic growth and robust earnings from freight. Thereafter, the O.R. went up to 88.3% in 2008-09 and 95.3% next year. Further, half of railways earnings generally go towards meeting wage and pensions. Thus, despite of charting out above 10% revenue growth plan, this budgeted OR of 92% seems to be unrealistic. The logic behind this is that around half of railways earning go towards meeting wage and pension bills of employees in normal course, and due to huge pay pressure, the ratio might worsen in budget year 2016-17. The calculations of railway might go haywire due to absence of a solid road map to boost the earnings.

The contours of Nav Arjan, Nav Manak and Nav Sanrachana

Indian railways, as pointed out by Railway Minister, are faced with two headwinds, entirely beyond its control. Firstly, the tepid growth of core sector in the economy leads to sluggish demand for rail

services; and secondly, the looming impact of the 7th pay commission and increased productivity

bonus pay outs. In the Railway Budget 2016-17, the minister Suresh Prabhu has chalked out a new plan to reorganise, restructure and rejuvenate Indian Railways which has three pillars viz. Nav Arjan, Nav Manak and Nav Sanrachna.

Nav Arjan

Nav Arjan means new avenues to earn . Traditionally, railways increase its earning by hiking fare.

The government wants to change this path and now wants to focus on new sources of revenue {i.e. non-tariff revenue} to that every tangible and non-tangible assets of the railways can be monetized. We note here that the Railways is planning to leverage the existing land, stations and tracks besides advertising to generate additional revenues and improve its financial health. Currently, the non- tariff revenue in railways is nominal at around 5% of total revenue. This figure stands at 20% for

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

some countries. The possible paths to make efforts towards moving higher non-fare revenues may be the following:

1. Monetize the land and buildings through allowing commercial use

2. Leasing out lands adjacent to the tracks to promote horticulture and tree plantation

3. Exploring the possibility of using railway tracks for generating solar power

4. Outdoor advertising at stations and other buildings of Indian Railways.

But reality is that none of the above is a new idea. These ideas have existed since long and have wanted

proper implementation ever since they were put in place.

Nav Manak

Nav Manak literally means New norms. By New Norms, the Railways wants to improve efficiency in spending its each rupee. The railway minister brings in the concept of Zero Based budgeting here. We recall that the zero based budgeting is a method in which all expenses for each new period are justified and no reference is made or considered for previous year. In other words, it involves preparing budget which every year must start from scratches with no pre-authorised funds. This kind of budgeting needs each activity to be justified on the basis of cost-benefit analysts and assumes that no balance is carried forward.

Nav Sanrachna

Nav Sanrachna literally means New Structures . The minister puts it like this: We need to Re-imagine the conventional ways of solving issues. Co-operation, Collaboration, Creativity and Communication should be the hallmark of our decision-making and actions. We will revisit all processes, rules, and structures to enable this transformation of IR. We will draw upon our inherent strengths, diverse talents and rich experience to

emerge stronger.

Nav Sanrachna encompasses all aspects of Indian Railways operations and might include: (1) improving cross functionality (2) reorganization of the Railway Board (3) Consolidation of Railway cadres and (4) establishment of RPIO.

Improving Cross Functionality

To improve the cross functionality, the new cross functional directorates would be set within the Railway Board to give a thrust to areas like non-fare revenues, speed enhancement and information technology. Thus, a new directorate related to mobility and speed can be expected in Railway Board.

Reorganization of Railway Board

The government is looking forward to reorganizing the Railway Board along business lines and suitably empower the board s chairman to lead the organization effectively. However, if this may lead to centralization of power is subject to debate.

Consolidation of Railway Cadres

The railways may consolidate multiple railway cadres to improve efficiency and reduce duplicity of work as per recommendations of the Bibek Debroy committee on rail modernization. We note here

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

that Indian Railway makes appointments under eight Group A services of which five are technical while three are non-technical. These are Indian Railways Service of Engineers, Indian Railway Service of Signal Engineers, Indian Railway Service of Electrical Engineers, Indian Railway Service of Mechanical Engineering, Indian Railways Stores Service, Indian Railway Accounts Service, Indian Railway Personnel Service and Indian Railway Traffic Service. The Bibek Debroy commitee had suggested consolidating them into two cadres.

Railway Planning and Investment Organization

To further improving planning and practices, the Indian Railway also plans to set up aRailway

Planning and Investment Organisation (RPIO) which would chalk out five and ten year corporate plans

and then identify the projects to achieve business goals. Further, Railways will also bring out a National Rail Plan 2030 to provide it a long-term perspective

for augmenting the rail network. Railway is already creating aRail Development Authority to enable

fair pricing of services, promote competition, protect customer interests and determine efficiency standards. In summary, Nav Sanrachna is all about reorganise restructure and rejuvenate Indian Railways for long term perspectives. It has less to do with the present disease of poor demand for railways due to

sluggish economy.

SRESTHA & SUTRA: The New Research Wings of Railways

SRESTHA

Advancement. This is a proposed special unit of Indian Railways comprised mostly of scientists and railway experts.

Design and Standards Organisation

(RDSO) . However, there are several issues with this RDSO. In most of its time, the RDSO is busy in

finalizing the standards and specifications for the new equipment to be acquired by Railways. Since most of the new technology in Railways is imported, the RDSO is not able to do in-house research work on various technologies required for upgradation in signalling and telecommunication system, track designing, improvement in rolling stock etc. But despite of these issues, RDSO is credited for developing of pre-stressed concrete sleepers used for laying tracks and the newly designed double Decker coaches. We note here that in December 2015, the Railways had created a committee to review and redefine the role RDSO.

Proposed Functions of SRESTHA

Currently, Indian Railway has a research arm called Research

refers

to Special

Railway

Establishment

for

Strategic

Technology

&

Holistic

According to proposals, the RDSO will continue to focus on day-to-day issues while the upcoming SRESTHA would be responsible for long-term research for improving the overall functioning of Indian Railways. It is expected to be headed by a reputed scientist, who would report directly to the

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Chairman.

SUTRA: the new cross functional team of Indian Railways

Indian Railway collects over 100 Terabytes of data every year, yet it is hardly analysed to gain business insights. Towards this direction, the Railway Budget 2016-17 has proposed to set up a dedicated, cross functional team calledSpecial Unit for Transportation Research and Analytics (SUTRA) for carrying out detailed analytics leading toooptimised investment decisions and operations. SUTRA will be comprised of professional analysts and best-in-class decision support systems. Its core function will be data-mining and data backed decision making.

The Innovation Challenge for Start-ups

In the last year budget, the Railway Ministry had promised to set an innovation council called Kayakalp which might come up with cost saving innovations in railway functioning. This council was later constituted with Ratan Tata as its head. In the current budget, the Railway Minister has set aside Rs. 50 Crore for an innovation fund from which grants can be made to employees, start-ups and growth oriented small businesses and set up of innovation labs / production units. The administration of this initiative is to be done by an innovation committee comprised of National Academy of Indian Railways, Railway Board and Kayakalp. Further, to find out innovative solutions to the railways critical problems, the railways have decided to launch an annual Innovation Challenge . For 2016-17, the three areas of this Innovation

Challenge are as follows:

1. Accessibility to trains from low level platforms

2. Increasing capacity of coaches

3. Digital capabilities at stations.

This found would work like a start-up incubator run by private companies, in which they groom the talent to work on start-up. More details on the policy are expected to be released in near future.

Avataran: The Seven Missions of Indian Railways

In the Railway Budget 2016-17, the Railway Minister Suresh Prabhu has announced 7 activities to be conducted in mission mode under the umbrella of Avataran . These missions are as follows:

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17
Railway and Union Budget 2016-17 Mission 25 Tonne 1. It aims to increase revenue of Railways

Mission 25 Tonne

1. It aims to increase revenue of Railways by augmenting the carrying capacity.

2. To achieve this, 10-20% freight loading will be done through 25-tonne axle-load wagons in 2016-17 and target movement of 70% of freight traffic on high axle load wagons by FY

2019-20.

Mission Zero Accident

1. The mission comprises two sub-missions.

2. Elimination of unmanned level crossings: The target is elimination of all unmanned level

crossings on Broad Gauge in the next 3-4 years. This will reduce deaths due to accidents and would improve throughput of the network.

3. TCAS (Train Collision Avoidance System): A new technology has been developed to equip 100%

of the High Density Network with TCAS in the next 3 years. It will prevent head on collisions and also improve throughput with increasing average sectional speeds.

Mission PACE (Procurement and Consumption Efficiency)

1. Mission PACE is aimed at improving procurement and consumption practices to improve the quality of goods and services.

2. Several optimum usage practices such as Vendor Managed Inventory, direct procurement of HSD, new procedures for identification and disposal of scrap, etc. will be adopted.

Mission Raftaar

1. Mission Raftaar aims at doubling of average speeds of freights trains as well as increasing the average speed of superfast mail/express trains by 25 kmph in the next 5 years.

2. Over the next five years, all loco hauled passenger trains will be replaced by DEMU/MEMU.

Mission Hundred

1. Under Mission 100, at least a hundred sidings {siding refer to low-speed track section / track branch distinct from a running line} will be commissioned in the next 2 years. The current siding policy would be revised to elicit greater private participation.

Mission beyond book-keeping

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

1. By establishing an accounting system, outcome will be tracked to inputs. Right accounting would determine right costing and hence right pricing.

Mission Capacity Utilisation

1. Under the mission, a blueprint is prepared for making full use of additional capacity created

through two Dedicated Freight Corridors between Delhi-Mumbai and Delhi-Kolkata which are scheduled to be commissioned by 2019. All the seven missions will be headed by a Mission Director, who directly reports to the Chairman, Railway Board for a timely targeted delivery. The Mission Directors will be supported by officers from each Zone/Production Unit/RDSO/Centralised Training Institutes. Each Mission will have annual outcome based performance targets.

Other Proposals of Railway Budget 2016-17

Key Reforms Proposed in the Budget The key reforms proposed in budget include the following:

1. draft bill on rail regulatory authority to be finalized

2. restructuring the Railway Board on business lines

3. Creation of cross functional directorates

4. Setting up RPIO {Railway Planning and Investment Organization}

5. Setting up a holding company for Railway s PSU, this could further result in listing in the exchanges.

6. Rail Plan 2030

7. Separate Special Railway Establishment for Strategic Technology

8. Setting Srestha and Sutra.

9. Seven missions

Capacity Augmentation Proposals

The Railway Budget 2016-17 is pegged at Rs. 1.21 Lakh Crore, which stands 21% higher than previous budget. Following are the capacity augmentation proposals.

Commissioning of Broad Gauge Track and track electrification

1. There is a plan to commission 2800 kilometers of Broad Gauge track. This amounts to be at the rate of over 7 km per day against an average of about 4.3 Km per day in the last 6 years. The government plans to increase this to about 13 kms per day in 2017-18 and 19 kms per day in 2018-19.

2. In terms of electrification, the plan is to electrify 2000 kilometers in 2016-17.

High Speed Passenger Corridor

1. The Budget has proposed a high speed passenger corridor from Ahmedabad to Mumbai. For this purpose, National High Speed Rail Corporation (NHSRC) Limited has been formed as an SPV

after the budget.

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

2. The High Speed train {Bullet Train in media circles) would be expected to cover the 508km between Mumbai and Ahmedabad in about two hours, running at a maximum speed of 350kmph and operating speed of 320 kmph.

Three new Freight Corridors

1. The minister promised that the eastern (Delhi-Kolkata) and western (Delhi-Mumbai) dedicated freight corridors would be ready by 2019. In the recent budget, the minister has

outlined plan to lay three more such corridors through the PPP {Public Private Partnership}.

2. The three new freight corridors are:

1. North-South connecting Delhi to Chennai

2. East-West connecting Kharagpur to Mumbai

3. East Coast connecting Kharagpur to Vijayawada.

3. The minister also made it clear that these three projects would be implemented on a high priority basis to ensure structuring, award and implementation in a time-bound manner through innovative financing mechanisms.

Port Connectivity

1. Port connectivity is an important element to ensure seamless logistics to boost country s imports and exports. In the last year budget Railways had launched acoastal connectivity

programme. Under this programme, Tuna Port {it is located in Kutch of Gujarat and is run by

Kandla Port Trust} has been already connected / commissioned while work is in progress to connect Jaigarh Port {a privately operated port in Maharashtra by JSW}, Dighi Port {Mumbai}, Rewas Port {Mumbai} and Paradip are under implementation.

2. For 2016-17, the government has proposed to undertake implementation of rail connectivity for the ports of Nargol {Gujarat} and Hazira {Surat Port} under PPP.

Proposals for New Trains and Train Services

For Reserved Passengers

Three train services viz. Humsafar, Tejas and UDAY have been introduced for reserved passengers.

1. Humsafar service would be fully air conditioned third A/C service with an option for meals.

2. Tejas on the other hand would showcase the future of train travel in India. With a top speed

of 130 kmph and above, Tejas offer onboard services such as entertainment, local cuisine and Wi-Fi through service providers, while ensuring accountability and improved customer satisfaction.

3. The Humsafar and Tejas services will guarantee cost-recovery by way of tariff and non-tariff measures.

4. Utkrisht Double Decker Air-Conditioned Yatri (UDAY) Express is an overnight double-

decker service, which will most likely increase the carrying capacity by almost 40 per cent.

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

For Unreserved Passengers

For unreserved passengers, Antyodaya Express and Deen Dayalu Coaches have been introduced.

1. Antyodaya Express will be a long-distance, fully unreserved, superfast train service, to be operated on dense routes

2. Addition of two to four Deen Dayalu coaches in some long distance trains for unreserved travel with facility for potable drinking water and a higher number of mobile charging points

Other Proposals for Passengers

1.

Sale of tickets through hand held terminals

2.

Sale of platform tickets through ticket vending machines both cash and card compatible

3.

E-ticketing facility to foreign debit/credit cards for foreign tourists and NRIs

4.

Facility of cancellation through the 139 helpline using One Time Password

5.

Bar coded tickets, scanners and access control on a pilot basis

6.

Progressive CCTV coverage at tatkaal counters

7.

Vikalp (Alternative Train Accommodation System) scheme to be expanded to provide choice of accommodation in specific trains to wait-listed passengers.

8.

IRCTC to manage catering services in a phased manner.

9.

Extending e-catering services from 45 stations to all 408 A-1 and A class stations.

10.

Explore making mandatory catering services optional in trains.

11.

Introducing a new policy where each stall at station can provide multiple products including milk products and OTC medicines

12.

Option to our customers for drinking tea in kulhad

13.

To convert all operational halts into commercial halts.

14.

Information boards in trains to list on-board services and also GPS based digital displays inside coaches to provide information regarding halts.

15.

A1 class stations to be manned with duly empowered Station Directors supported by cross functional teams.

16.

Passenger amenities and beautification on stations at pilgrimage centres including Ajmer, Amritsar, Bihar Sharif, Chengannur, Dwarka, Gaya, Haridwar, Mathura, Nagapattinam, Nanded, Nasik, Pali, Parasnath, Puri, Tirupati, Vailankanni, Varanasi and Vasco.

17.

Aastha circuit trains to connect important pilgrim centres.

18.

Porters to have new uniforms and train them in soft skills, to be henceforth called sahayak.

19.

Expansion of Sarathi Seva to help old and disabled passengers requiring assistance at stations.

20.

Strengthen existing services for enabling passengers to book battery operated cars, porter services, pick up and drop, and wheel chair services Rail Mitra Sewa.

21.

Ensuring all stations under redevelopment are accessible by Divyang

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

22. At least one Divyang friendly toilet at each platform in A1 class stations in 2016-17.

23. Wi-Fi at 400 stations in next year.

Proposals for Cleanliness

1. The railway minister has announced Clean my Coach service through SMS; and ranking of A1 and A stations based on periodic third party audit and passenger feedback.

2. Waste segregation and recycling centres; Awareness campaigns for cleanliness; additional 30,000 bio-toilets are other proposals.

3. The budget has also announced providing portable structures with bio-toilets at all platforms of select stations for senior citizens, Divyang and women travellers.

Farmers, Industry, Environment and Energy related Proposals

Proposals for Farmers

1. The budget has proposed encouraging development of cold storage on vacant land near freight terminals. Local farmers and fishermen would be given preferential usage of the facility.

2. Railway will issue a policy on this context in next three months. Railways have also proposed to lease land along tracks for floriculture / horticulture.

Expanding Freight Basket

1. To handle declining modal share of freight trains, Railways plans to expand the freight basket of the railways. Currently, the freight basket of Indian Railways is dominated by 10 bulk commodities which enjoy a share of around 88%.

2. To expand the revenue base, Railways need to look into other commodities also. The railways are doing a fully fledged market study to understand demand / supply scenario towards this.

Other Proposals related to Industry

1. Review of tariff policy to evolve a competitive rate structure vis-a-vis other modes, permit multi-point loading/unloading and apply differentiated tariffs to increase utilization of alternate routes.

2. Signing long term tariff contracts with key freight customers using pre-determined price escalation principles.

3. To develop Rail side logistic parks and warehousing in PPP mode

4. 10 goods sheds to be developed by Transport Logistics Company of India (TRANSLOC) in

2016-17.

5. Inaugurating soon India s first rail auto hub in Chennai to capture automobile traffic.

6. Exploring feasibility of opening up leasing of general purpose wagons.

7. Appointing Key Customer Managers to liaison with our major freight stakeholders.

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Proposals for environment protection and energy conservation

1. To reduce energy consumption in non-traction area by 10% to 15%; all new light provisions will be LED luminaire only

2. More than 2,000 locations provided with Rain Water Harvesting (RWH) facility; RWH systems will be provided in a phased manner in all establishments having rooftop areas of more than 200 square metres

3. Environmentally friendly composite sleepers made up of recycled plastic waste will be used over all girder bridges

4. Tender documents for 50 MW solar plants at rooftop issued and facility for another 100 MW being set up

5. To commission 132.5 MW of windmill power plants in 2016-17

6. Automatic coach washing plants to be commissioned in major coaching depots with a holding of more than 500 coaches

7. To convert all production units as well as at least one workshop in each Zonal Railway as green industrial unit

Staff Welfare Proposals

1.

To tie up with health ministry for ensuring an exchange between Railways hospitals and Government hospitals.

2.

Introduce AYUSH systems in 5 Railway hospitals.

3.

All gangmen to be provided devices called Rakshak which will intimate them about approaching trains.

4.

To reduce weight of the tools carried by gangmen while patrolling

5.

Provide toilets and air-conditioning in cabs for loco pilots.

6.

one C T Venugopal chair on Strategic Finance, research and policy development

7.

One Kalpana Chawla chair on geo-spatial technology for IR.

8.

India s first Rail University to come up at Vadodara

9.

Skill development on IR premises with Ministry of Skill Development

10.

Railway Workshops and Production Units to develop Centres of Excellence for Skill Development , focussing on one/two specialized activities for the general public

11.

Join hands with prominent NGOs to provide skilling to people in remote areas including wards of Railways employees.

Proposals for North East and J&K

1. Mizoram and Manipur will be brought on Broad Gauge map with commissioning of the Kathakal-Bhairabi and Arunachal-Jiribam Gauge Conversion projects.

2. Decongestion work on the Jalandhar- Jammu line, an important link to the valley, is going on

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

in full swing.

3. Doubling of two bridges will be commissioned by March 2016, while the other two bridges will be completed by 2016-17.

Union Budget 2016-17

Note: For basic terminology / concepts related to budget, you may please refer to theGovernment

Budgeting-1 Document. This document is a basic summary of the Budget, we have shortlisted some

of the topics, which shall be covered in detail in subsequent CGS documents. ********* On February 29, 2016, Union Finance Minister Arun Jaitley presented the general budget for 2016-17 in the Lok Sabha. Below are the key discussions from the budget documents.

The Nine Pillars of Modi-Jaitley Reform Agenda

Union budget 2016-17 is centered around a transformative agenda with nine pillars. These nine pillars

of Modi-Jaitley macroeconomic strategy provide adequate basis to ensure that India remains a growing large economy. These nine pillars are as follows:

1. Agriculture and Farmer welfare

2. Rural Sector

3. Social Sector & Healthcare

4. Education, Skills and Job creation

5. Infrastructure Investment

6. Financial Sector Reform

7. Governance Reform and Ease of Doing Business

8. Fiscal Discipline

9. Tax reforms to reduce compliance burden

They have been discussed below:

Agriculture and Farmers Welfare

Agriculture and farmer s welfare has received the top slot in the nine-pillar agenda of Budget 2016-17 with total allocation of Rs. 35,984 crore. Due importance has been given to irrigation by announcing that Pradhan Mantri Krishi Sinchai Yojana is to be implemented in mission mode and 28.5 lakh hectares will be brought under irrigation. The government will fast track 89 irrigation projects languishing under Accelerated Irrigation Benefits Programme. Government has also decided to set up a Long Term Irrigation Fund within NABARD with an initial corpus of about Rs.20,000

crore. Other policy announcements are as follows:

1. Programme for sustainable management of ground water resources with an estimated cost of Rs.6,000 crore will be implemented through multilateral funding

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

2. 5 lakh farm ponds and dug wells in rain fed areas and 10 lakh compost pits for production of organic manure will be taken up under MGNREGA

3. Soil Health Card scheme will cover all 14 crore farm holdings by March 2017.

4. 2,000 model retail outlets of Fertilizer companies will be provided with soil and seed testing facilities during the next three years

5. Promote organic farming through Parmparagat Krishi Vikas Yojana and Organic Value Chain

Development in North East Region .

6. Unified Agricultural Marketing e-Platform to provide a common e-market platform for wholesale markets

7. Allocation under Pradhan Mantri Gram Sadak Yojana increased to Rs. 19,000 crore. Will connect remaining 65,000 eligible habitations by 2019.

8. To reduce the burden of loan repayment on farmers, a provision of Rs. 15,000 crore has been made in the BE 2016-17 towards interest subvention

9. Allocation under Prime Minister Fasal Bima Yojana Rs.5,500 crore.

10. 850 crore for four dairying projects Pashudhan Sanjivani , Nakul Swasthya Patra , E-

Pashudhan Haat and National Genomic Centre for indigenous breeds.

The most notable phrase in the Budget speech was doubling of farmers incomes in five years . This seems to be a hyperbole because this would need 15% growth per year and is a formidable target.

Rural Sector

The total allocation for rural sector has been at Rs. 87765 Crore. The other announcements are as follows:

1. 2.87 lakh crore will be given as Grant in Aid to Gram Panchayats and Municipalities as per the recommendations of the 14th Finance Commission

2. Every block under drought and rural distress will be taken up as an intensive Block under the Deen Dayal Antyodaya Mission

3. A sum of Rs.38,500 crore allocated for MGNREGS.

4. 300 Rurban Clusters will be developed under the Shyama Prasad Mukherjee Rurban Mission

5. 100% village electrification by 1st May, 2018.

6. District Level Committees under Chairmanship of senior most Lok Sabha MP from the district for monitoring and implementation of designated Central Sector and Centrally Sponsored Schemes.

7. Priority allocation from Centrally Sponsored Schemes to be made to reward villages that have become free from open defecation.

8. A new Digital Literacy Mission Scheme for rural India to cover around 6 crore additional

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

household within the next 3 years.

9.

National Land Record Modernisation Programme has been revamped.

10.

New scheme Rashtriya Gram Swaraj Abhiyan proposed with allocation of Rs.655 crore.

Social Sector and Health Care

The key budget proposals towards social sector and health care are as follows:

1. 151581 Crore have been allocated for social sector including education and health care.

2. 2,000 crore have been allocated for initial cost of providing LPG connections to BPL families.

3. New health protection scheme will provide health cover up to Rs. One lakh per family. For senior citizens an additional top-up package up to Rs. 30,000 will be provided.

4. 3,000 Stores under Prime Minister s Jan Aushadhi Yojana will be opened during 2016-17.

5. National Dialysis Services Programme to be started under National Health Mission through

PPP mode.

6. Stand Up India Scheme to facilitate at least two projects per bank branch. This will benefit at least 2.5 lakh entrepreneurs.

7. National Scheduled Caste and Scheduled Tribe Hubto be set up in partnership with industry

associations.

8. Allocation of Rs.100 crore each for celebrating the Birth Centenary of Pandit Deen Dayal Upadhyaya and the 350th Birth Anniversary of Guru Gobind Singh.

Education, Skills And Job Creation

Following are the important announcements made in Education, Skills and Job creation.

1. Government will open 62 new Navodaya Vidyalayas.

2. Under Sarva Shiksha Abhiyan, the government would increase focus on quality of education.

3. Regulatory architecture to be provided to ten public and ten private institutions to emerge as

world-class Teaching and Research Institutions

4. Government will establish a Higher Education Financing Agencywith initial capital base of

Rs.1000 Crores

5. A Digital Depository for School Leaving Certificates, College Degrees, Academic Awards and Mark sheets to be set-up.

6. For skill development, allocation of Rs. 1804 Crore has been done. Government will set up 1500 Multi-skill Training Institutes.

7. Government will also establish a National Board for Skill Development Certification partnership

with the industry and academia.

8. Government also would provide Entrepreneurship Education and Training through Massive Open Online Courses (MOOCs).

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

9.

In job creation, the Government will pay a contribution of 8.33% for new employees enrolling in EPFO for the first three years of their employment. A provision of Rs. 1000 crore has been made towards this direction.

10.

The government will make 100 Model Career Centres operational by end of 2016-17 under the National Career Service.

11.

Government will draft a Model Shops and Establishments Bill and circulate it to states.

Infrastructure and Investment

The key proposals in Infrastructure and Investment are as follows:

1. Total investment in the road sector, including PMGSY allocation, would be Rs.97,000 crore during 2016-17.

2. India s highest ever kilometres of new highways were awarded in 2015.

3. To approve nearly 10,000 kms of National Highways in 2016-17.

4. Allocation of Rs.55,000 crore in the Budget for Roads. Additional Rs. 15,000 crore to be raised by NHAI through bonds.

5. Total outlay for infrastructure Rs.2,21,246 crore.

6. Amendments to be made in Motor Vehicles Act to open up the road transport sector in the passenger segment.

7. Action plan for revival of unserved and underserved airports to be drawn up in partnership

with State Governments.

8. To provide calibrated marketing freedom in order to incentivise gas production from deep- water, ultra deep-water and high pressure-high temperature areas.

9. Comprehensive plan, spanning next 15 to 20 years, to augment the investment in nuclear power generation to be drawn up.

Steps to re-vitalise PPPs

1. Government will introduce the Public Utility (Resolution of Disputes) Bill in 2016-17.

2. Guidelines for renegotiation of PPP Concession Agreements will be issued

3. New credit rating system for infrastructure projects to be introduced.

4. Reforms in FDI policy in the areas of Insurance and Pension, Asset Reconstruction Companies, Stock Exchanges.

5. 100% FDI to be allowed through FIPB route in marketing of food products produced and manufactured in India.

6. A new policy for management of Government investment in Public Sector Enterprises, including disinvestment and strategic sale, approved.

Financial Sector Reforms

The following announcements have been made towards Financial Sector Reforms.

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

1.

A comprehensive Code on Resolution of Financial Firms to be introduced.

2.

Statutory basis for a Monetary Policy framework and a Monetary Policy Committee through the Finance Bill 2016.

3.

A Financial Data Management Centre to be set up.

4.

RBI to facilitate retail participation in Government securities.

5.

New derivative products will be developed by SEBI in the Commodity Derivatives market.

6.

Amendments in the SARFAESI Act 2002 to enable the sponsor of an ARC to hold up to 100% stake in the ARC and permit non institutional investors to invest in Securitization Receipts.

7.

Comprehensive Central Legislation to be bought to deal with the menace of illicit deposit taking schemes.

8.

Increasing members and benches of the Securities Appellate Tribunal.

9.

Allocation of Rs.25,000 crore towards recapitalisation of Public Sector Banks.

10.

Target of amount sanctioned under Pradhan Mantri Mudra Yojana increased to Rs.1,80,000 crore.

11.

General Insurance Companies owned by the Government to be listed in the stock exchanges.

Governance and Ease Of Doing Business

The following announcements have been made towards Governance Reform and Ease of Doing Business.

1. A Task Force has been constituted for rationalisation of human resources in various Ministries.

2. Comprehensive review and rationalisation of Autonomous Bodies.

3. Aadhaar to be given statutory backing

4. Introduction of DBT on pilot basis for fertilisers.

5. Automation facilities in 3 lakh fair price shops by March 2017.

6. Amendments in Companies Act to improve enabling environment for start-ups.

7. Price Stabilisation Fund with a corpus of Rs.900 crore to help maintain stable prices of Pulses.

8. Ek Bharat Shreshtha Bharat programme will be launched to linkStates and Districts in an

annual programme that connects people through exchanges in areas of language, trade, culture, travel and tourism.

Fiscal Discipline

Following are the key proposals in fiscal discipline.

1. Fiscal deficit in RE 2015-16 and BE 2016-17 retained at 3.9% and 3.5%.

2. Revenue Deficit target from 2.8% to 2.5% in RE 2015-16

3. Total expenditure projected at Rs.19.78 lakh crore

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

4.

Plan expenditure pegged at Rs.5.50 lakh crore under Plan, increase of 15.3%

5.

Non-Plan expenditure kept at Rs.14.28 lakh crores

6.

Special emphasis to sectors such as agriculture, irrigation, social sector including health, women and child development, welfare of Scheduled Castes and Scheduled Tribes, minorities, infrastructure.

7.

Mobilisation of additional finances to the extent of Rs.31,300 crore by NHAI, PFC, REC, IREDA, NABARD and Inland Water Authority by raising Bonds.

8.

Plan / Non-Plan classification to be done away with from 2017-18.

9.

Every new scheme sanctioned will have a sunset date and outcome review.

10.

Rationalised and restructured more than 1500 Central Plan Schemes into about 300 Central Sector and 30 Centrally Sponsored Schemes.

11.

Committee to review the implementation of the FRBM Act.

Tax reforms to reduce compliance burden

The proposals towards tax reforms are focused on providing certainty in taxation and simplification and rationalization of the taxes. The key proposals are as follows:

1. Domestic taxpayers can declare undisclosed income or such income represented in the form of any asset by paying tax at 30%, and surcharge at 7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income. Such declarants will have immunity from prosecution.

2. Surcharge levied at 7.5% of undisclosed income will be called Krishi Kalyan surcharge to be used for agriculture and rural economy.

3. New Dispute Resolution Scheme to be introduced. No penalty in respect of cases with disputed

tax up to Rs.10 lakh. Cases with disputed tax exceeding Rs.10 lakh to be subjected to 25% of the minimum of the imposable penalty. Any pending appeal against a penalty order can also be settled by paying 25% of the minimum of the imposable penalty and tax interest on quantum addition.

4. High Level Committee chaired by Revenue Secretary to oversee fresh cases where assessing officer applies the retrospective amendment.

5. One-time scheme of Dispute Resolution for ongoing cases under retrospective amendment.

6. Penalty rates to be 50% of tax in case of underreporting of income and 200% of tax where there is misreporting of facts.

7. Disallowance will be limited to 1% of the average monthly value of investments yielding exempt income, but not exceeding the actual expenditure claimed under rule 8D of Section 14A of Income Tax Act.

8. Time limit of one year for disposing petitions of the tax payers seeking waiver of interest and

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

penalty.

9. Mandatory for the assessing officer to grant stay of demand once the assesse pays 15% of the disputed demand, while the appeal is pending before Commissioner of Income-tax (Appeals).

10. Monetary limit for deciding an appeal by a single member Bench of ITAT enhanced from Rs.15 lakhs to Rs.50 lakhs.

11. 11 new benches of Customs, Excise and Service Tax Appellate Tribunal (CESTAT).

12. Towards simplification and rationalization of taxes, the government will abolish 13 cesses, levied by various Ministries in which revenue collection is less than Rs.50 crore in a year.

13. For non-residents providing alternative documents to PAN card, higher TDS not to apply.

14. Revision of return extended to Central Excise assesses.

15. Additional options to banking companies and financial institutions, including NBFCs, for reversal of input tax credits with respect to non-taxable services.

16. Customs Act to provide for deferred payment of customs duties for importers and exporters with proven track record.

17. Customs Single Window Project to be implemented at major ports and airports starting from beginning of next financial year.

18. Increase in free baggage allowance for international passengers. Filing of baggage only for those carrying dutiable goods.

Short Notes / Observations from Budget

National Investment Grid

To promote private investment in different states, the Department of Industrial Policy and Promotion (DIPP) has initiated a national investment grid, which will map business opportunities in different states so that the private sector can be encouraged to invest, provided states are made an equal partner in it. The grid will not only have the details of the upcoming projects along with the existing ones, but will also list the land available with the central government, public sector undertakings, and the states.

Simplification of Income-tax Act

The government had already accepted and acted on many recommendations of the Tax Administration Reform Committee. Now, the FM has proposed to accept several recommendations made by the Justice Easwar Committee formed to simplify the Income-tax Act. The Budget

proposes that if non-residents provide alternative documents to PAN Card, a higher withholding tax would not apply. Additional options were made available to banking companies and financial institutions, including non-banking financial companies, for reversal of input tax credits on non- taxable services.

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Tax Exemption to Regulators

Services provided by financial sector regulators have been exempted from service tax liability from April 1. SEBI, IRDAI & PFRDA were not included in the negative list of services for taxation purposes, which made the first two liable to pay service tax at 14% each and pension fund regulator at 3.5%. The exemption has come as a relief for the regulators who reportedly received notices from the revenue department seeking details for assessment of service tax liability from 2012 onwards.

SAT Members, Benches Go Up

Securities Appellate Tribunal (SAT), which hears and disposes of appeals against orders passed by the likes of SEBI, IRDA and PFRDA, will have more members and benches. The FM in his Budget speech said the SEBI Act will be amended in FY17 for this purpose. At present, SAT has only one bench which sits in Mumbai. Justice JP Devadhar is the presiding officer and its other two members are Jog Singh and CKG Nair. SAT is a quasi judicial body.

New Derivatives in Commodity Trading

The FM s announcement that SEBI would develop new derivatives products in the commodity markets has sparked hopes among stakeholders that options and indices trading will see the light of the day soon, greatly raising average daily turnover from just under Rs. 30,000 crore. Currently, only futures trading is allowed in products like gold, silver, copper, crude, natural gas, sugar, edible oil seeds, chana, etc. Options and indices trading could raise turnover manifold and encourage more institutional participation over time.

Big projects for power and roads

The government will offer ultra mega power projects worth a total of Rs. 1.5 lakh crore in the current and next fiscal year. In addition, the highways sector will offer projects worth nearly Rs. 1.5 lakh crore in the new fiscal year.

Coal cess doubled

The clean energy cess on coal, now called the clean environment tax, has been doubled to Rs. 400 per tonne. This will raise the price of power by about 20 paisa per unit, which will be passed on to consumers. It will also raise costs for other consumers like the steel sector, along with narrowing the gap between thermal and solar power. This helps make green energy projects more viable.

Amendment in the Companies Act

The government proposed amending the Companies Act to make it easier to start and run a business. If that goes through in the Budget session, companies can be registered in a day. The amendments are aimed at removing impediments to doing business and providing an enabling environment for start-ups. Entrepreneurs and start-up investors for long have been urging for just such a thing.

Tax breaks for the Newbies

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

The FM proposed 100% tax exemption on profits made in any three of a start-up s first five years, for ventures set up between April 2016 and March 2019. Investment holding period in unlisted firms was reduced to 2 years from 3 years for availing exemption from capital gains tax. Also, capital gains will not be taxed on investments by individuals in notified start-ups, in which they hold majority shares.

For Women, Students and Dalits

The govt plans to allocate Rs. 500 crore to establish start-up hubs for women and aspiring entrepreneurs from the backward classes, and Rs. 1,700 crore to set up 1,500 skilling institutes to train youngsters both for jobs and to start their own businesses. It also proposed to provide entrepreneurship education and training in 2,200 colleges, 300 schools, 500 industrial training institutes and 50 vocational training centres through massive open online courses, or MOOCs.

Govt Moving Away from Guarantees?

Dealing with bankruptcies is a difficult task, more so when it comes to financial services companies. The government is moving on that now. It would come up with a resolution mechanism for banks, insurance firms and finance companies. This, along with the Bankruptcy Code of 2015, would provide a comprehensive mechanism. Does it indicate a slow government withdrawal from providing guarantees? We shall discuss it later in our CGS documents.

NBFCs Get Much Needed Sop

Non-banking finance companies to get tax rebate for all actual provisions made towards bad and doubtful debts subject to a cap of 5% of the gross total income. For NBFCs reeling under accumulated bad assets and tighter provisioning norms RBI has asked them to recognise bad loans within 90 days from March 2018 it is a welcome step.

More Bonds on the Way

The infrastructure sector, seen as a key driver of the country s economy, will get Rs. 31,300 crore from debt investors in the coming fiscal year with state-owned companies such a National Highways Authority of India, IREDA, Power Finance Corporation, Rural Electrification Corporation and Nabard raising funds through such offerings.

Towards Better Tax compliance of MNCs

MNCs would be required to submit the profits they make, no. of employees they hire & taxes they pay in each country they operate. This could mean that many companies could end with transfer pricing demands and later litigation if the Indian tax authorities decide to take action based on the information they receive. As we discussed in our CGS modules earlier, the government has introduced a framework for Base Erosion and Profit Shifting (BEPS), a global pact to check tax avoidance by MNCs. BEPS will cover companies with revenue of over 750 mn or Rs. 5,250 crore. Also, MNCs with huge R&D facilities in India but which register the patents generated from here in

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

other countries, could come under lens. A new 6% tax on ad revenues of MNCs being paid from India is a dampener for e-commerce.

Ending Tax adventurism

The government has sought to end tax adventurism. It has taken away discretionary powers of the tax officer as each misdemeanour is now categorised and a penalty is defined. The reduction of penalty rates to 50% to 200% against 100% to 300% will give respite to companies alleged to have evaded taxes. Transparency is welcome. Strengthening the dispute resolution mechanism and VDIS will reduce tax payer disputes.

Tax budget for service providers goes up

Two new cesses queer the pitch for service providers as well as automobile sector. A new 0.5% Krishi Kalyan Cess proposed on all taxable services will take the rate of service tax to 15% (Swachh Bharat Cess of 0.5% + 14 service tax rate). Saving grace with this new cess, which seeks to fund agri sector initiatives, is that it would be available as credit. Infra cess of 2.5% on select diesel vehicles and higher 4% on SUVs and bigger sedans spoils the party for auto sector.

Service tax relief for patients

The services of general insurance business provided under Niramaya Health Insurance scheme launched by National Trust for the Welfare of Persons with autism, cerebral palsy, mental retardation and multiple disabilities in collaboration with private/public insurance companies are being exempted from the 14% service tax they were earlier subject to. This will make healthcare affordable to the poor. The exemption kicks in from April 2016. The Budget also has a proposal to remove the customs duty on Braille paper from 10% at present.

Expected Revenue from Spectrum

Government estimates revenue of Rs. 98,994.93 crore from spectrum auctions, licence fee and one- time spectrum charges in the year ending March 2017. This is going to be a 76% jump from the revised estimates of 2015-16. A huge upfront payment is expected from next round of auctions, likely in June. At base prices, the government may garner about Rs. 5.44 lakh crore, of which at least 25% is expected in the next fiscal year. However, if the amount does not come, Jaitley s math can go haywire.

Subsidy Bill

Government has budgeted total subsidies at Rs. 2.5 lakh crore for FY17, lower than revised estimate of Rs. 2.58 lakh crore for FY16. Subsidy is lower under all the key heads food, fertiliser and petroleum products. There is thus risk of spike in subsidy if crude and commodity prices harden. Food subsidy also looks to be underprovided at Rs. 1.34 lakh crore compared with Rs. 1.39 lakh crore in current year given that its reach is to be expanded.

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Railway and Union Budget 2016-17

Aadhaar Single-Platform Social Security Delivery

A social security platform will be developed using Aadhaar to accurately target beneficiaries. Even a new health protection plan providing health cover of up to Rs. 1 lakh per family could be rolled out on this platform. A top-up package will be provided to those aged 60 years and above.

No More Chulhas

The government has Massive Plan for Subsidised LPG Connection. About 1.5 crore BPL households will get LPG connections for women members at an outgo of Rs. 2,000 crore. While there may be increase in subsidy because of better availability, the indirect benefit of savings on healthcare cost due to burning wood chulha should cover the cost.