Railway Accounts Department Examinations

Showing posts with label Social costs. Show all posts
Showing posts with label Social costs. Show all posts

Wednesday, January 22, 2020

Social Cost Benefit Analysis

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Social Cost Benefit Analysis
LDCE 2015 - Southern Railway

·         A social cost benefit analysis is a systematic and cohesive method to survey all the impacts caused by an development project or other policy measure.

·         Also known as Economic analysis.

·         A decision-making strategy  - assessing the impact of Investments/Projects on the Society as a whole.

·         It evaluates not just the financial benefits/costs (profits /losses), but all economical benefits/costs (pollution, health, safety, travel times etc)

·         Social Benefit  - if it is positive impact

·         Social Cost       - if it is negative impact

·         Main objective:  To attach a price to as many effects as possible in order to uniformly weigh all the mixed (i.e., positive and negative) effects.

·         Example: PRS (Passenger Reservation System) project in Indian Railways.

Ø  PRS started as a pilot project in 1985 on two trains between Delhi and Chennai with a few reservation centres in Delhi. In 2003–04, it was operational at 1,200 centres, had 4,000 terminals, covered 3,000 trains and handled one million reservations per day.

Ø  Financial benefits: cost savings, staff reduction and increase in revenue.

Ø  Economic benefits: Improved customer service, higher quality of information, improved work environment, streamlined operations, and higher employee self-esteem and morale

Ø  “from anywhere to anywhere reservations”,

Ø  With IRCTC online ticketing, the booking of train tickets is much more easier.

Ø  An approximate estimate that about Rs. 250 crore was spent on the PRS up to the CONCERT stage.  At proposal stage, it was observed as negative Rate of Return from the point of financial returns.   

Ø  A very significant intangible benefit is national pride.

Ø  The Indian Railways management and staff are justifiably proud that they have successfully implemented a world-class, state of-the-art system in a developing country.

Ø  The success of the railway PRS provided the launch pad for India’s software industry exports.


Tuesday, December 25, 2018

Social Service Obligations /Social costs in Indian Railways and CSR in India

Social Service Obligations /Social costs in Indian Railways

ü  What is social service Obligation or Social cost ?

Ans: To carry out certain transport activities  which are essentially uneconomic in nature, but in the larger interest of the economically disadvantaged sections of the society. Losses incurred on this account fall under Social Service Obligations of IR.

ü  Losses incurred on this account fall under Social Service Obligation of IR.

ü  Social Service Obligations by IR - 2016-17  - Approx  29,600 Crores.

The main elements of Social Service Obligation in IR are losses relating to:

(i) Essential Commodities carried below cost;

(ii) Passenger and Other Coaching services;

(iii) Operation of Uneconomic Branch Lines;

(iv) New Lines opened for Traffic during the last 15 years.

1.    Losses on transportation of Essential Commodities carried below cost:

ü  As part of the Railways’ Social Service Obligation, certain essential commodities of mass consumption like fruits and vegetables, sugarcane, paper, charcoal, bamboos, cotton raw pressed etc. are carried below cost of operation in order to contain their market prices.

ü   Approximately 42 crore in 2016-17. 

2.    Losses on Passenger and Other Coaching services:

ü  Analysis of the profitability of Coaching Services in 2016-17 has revealed an overall loss of ` 39500 crore. Out of which, Net suburban losses in Chennai, Kolkata, Mumbai & Secunderabad – Rs.5,389 Crores

ü  Low Second class ordinary fares (sub & non sub) constitutes 79 % of total traffic but provide only 17% of total passenger earnings.

ü  Season tickets – Non suburban constitutes 23 % of Total Non suburban traffic But provides only 1 % of Earnings

ü  Season tickets – Suburban constitutes 61 % of total traffic but provide only meager 40 % of total passenger earnings.

ü  Commuters availing concession Monthly and Quarterly Season Tickets on Suburban Sections of Chennai, Kolkata, Mumbai and Secunderabad.

ü  (iv) Concessions in Fare extended to various categories such as (i) Recipients of gallantry awards (ii) National sports awards (iii) Participants in National and State sports tournaments (iv) Teachers honored with National awards (v) Shram awardees (vi) War widows (vii) Patients suffering from cancer, tuberculosis and other serious diseases (viii) Handicapped persons (ix) Press correspondents (x) Film technicians etc. (v) Concessions are also extended to (i) Military traffic (ii)Postal traffic (iii) Transportation of registered newspapers & magazines etc. and (iv) Traffic to the North East.

ü   IR also steps in to provide emergency relief by transporting materials like food, water, fodder etc. to areas affected by natural disasters like drought, cyclone, earthquake etc.

3.    Operation of Uneconomic branch lines

ü  Despite concerted efforts to enhance earnings on branch lines, most of these lines remain commercially unviable.

ü  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.

ü  As on date 99 uneconomic branch lines existed

ü  On an original investment of Rs.4,476Crores on Uneconomic Branch lines, the losses during the year 2016-17 amounted to Rs. 1,855 crore.

4.    New lines opened for traffic during the last 15 years:

ü  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.

ü  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.

ü   Periodic reviews have revealed that of the 17 lines examined in 2016-17, as part of Social Service Obligations of the Railways for development of backward areas, all lines are showing either negative or unremunerative returns

Compensation for Social Service Obligations in Other Countries:

Railways, the world over, are called upon to meet certain public service obligations at lower tariffs for which they are adequately compensated for by the government. Such support is provided in various forms and for different purposes like:

(i) Compensation for losses on account of concessional tariffs;

(ii) Out-right grant to cover deficits;

(iii) Soft loans to meet the deficits;

(iv) Financial support to maintain viability of the system and to earn marginal profits;

(v) Writing off of accumulated debts and unproductive capital; and

(vi) Support for investment and infrastructure maintenance.

Corporate Social Responsibility

Corporate social responsibility is the responsibility of the corporate entity towards the society in consideration of the support given and sacrifices made by the society. The corporations exploit the natural resources of the country, cause incidental damage to environment and inconvenience to the people of the project area. Therefore, they have a responsibility towards the society to share a part of their profit.

CSR and India 

·          Section 135 & Schedule VII of Companies Act, 2013

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

·         Activities of reduction of poverty, education, health, environmental sustainability, gender equality, vocation skills etc

·         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.