The new service tax rate of 14% is applicable from 1st June 2015 (per Notification No. 14/2015-ST dated 19th May 2015).

• Ensure that all your bills and invoices from that date on has the higher rate of service tax.
• Also ensure that you DO NOT charge the Education and Higher Education Cess (2% and 1%) as the new service tax rate is inclusive of these.
• You do not need to show the Cess in your bills / invoices after 1st June 2015.

Changes (in Rules 6 of Service Tax Rules, 1994) for change in abatement rates of Service Tax for: Air Travel Agent, Life Insurance Business, Foreign Exchange Brokers and Distributor & Selling Agent of Lottery will also be applicable from 1st June 2015 (Notification No. 15/2015-ST dated 19th May 2015).

• In addition following changes are also applicable from 1st June 2015:
• Service Tax on amusement facilities and Entertainment Events. Exemption will be available for following services where tickets are priced at Rs.500 or less per person.
• Service Tax on Liquor Job Work

Date of applicability of following provisions is yet to be notified:

• Expansion of scope of services provided by Government and Local Authority; and
• Applicability of ‘Swachh Bharat Cess’

Do refer to our earlier note on Service Tax Changes from 1st April 2015 either in our earlier newsletter or on our blog.

The recent Union Budget on 28th February 2015 brought with it some changes to Service Tax. While some of the changes are indeed applicable from 1st April 2015, others are not. We are detailing below each of these for your ready reference.

Increase in Rate from 12.36% to 14.00%

• NOT effective from 1st April 2015.
• It shall be effective from the date it is notified in the gazette (we shall keep you informed)
• Till then charge 12.36% as earlier

Swach Bharat Cess of 2%

• NOT effective from 1st April 2015.
• It shall be effective from the date it is notified in the gazette (we shall keep you informed)

Changes in the Reverse Charge Mechanism

All these are effective from 1st April 2015 and base your bills, calculation and payments accordingly

• Goods Transport – Abatement Rate changed to 30% from 25%. In a nutshell, pay service tax at 3.708% instead of the earlier 3.09%.
• Manpower Supply / Security Services – 100% to be paid by service receiver (earlier 75% was paid by service receiver and 25% by service provider). Thus, service receiver will now have to pay service tax at full 12.36%.

For these two changes (above) ensure that, for the services availed in 2014-15, the service provider’s invoice is dated 31 March 2015.

• For the following services the existing rates will continue. The new rates will be effective only after the date is notified.

1. Air Travel Agent
2. Life Insurance
3. Money Changing Service
4. Lottery

Exemptions Withdrawn

The following services will now be liable for Service Tax as the exemptions provided till now have been withdrawn

• Services provided to the Government / local authority / governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of (a) civil structure for use other than for commerce, industry, etc., (b) structure for use as educational / clinical / art or cultural establishment, and (c) residential complex for self-use / use of employees

Thus exemption for historical monuments, etc., canals, dams, etc. and water supply, water treatment and sewage disposal continues

• Construction, erection, commissioning or installation of original works pertaining to an airport or port
• Transportation of food stuff by rail / vessels / road. Thus, services by way of transportation of foodstuff except milk, salt and food grain (including flour, pulses and rice) would be liable to service tax.
• Services provided by mutual fund agent to a mutual fund / asset management company and selling / marketing agent of lottery ticket to a distributor. These will be now chargeable to service tax under the Reverse Charge Mechanism, i.e. the Mutual Fund / AMC will have to pay the service tax.

New Exemptions

The following services will NOT be liable to service tax:

• Transportation of a patient to / from a clinical establishment by a clinical establishment by all ambulance services
• Service provided by a Common Effluent Treatment Plant operator for treatment of effluent
• Services of pre-conditioning / pre-cooling / ripening / waxing / retail packing / labeling of fruits & vegetables
• Admission to a museum, zoo, national park, wild life sanctuary and a tiger reserve
  Goods transport agency service for transport of export goods by road from the place of removal to a land customs station (LCS). Note that transport of export goods by road from place of removal to an inland container depot / container freight station / port / airport is already exempt.

Changes to Claiming CENVAT Credit

One can now claim credit (set-off) of service tax paid under reverse charge by service receiver after making the payment of service tax and even if value of service is not paid.
Earlier, the set-off could be claimed only if the provider of service was paid his/her dues.

Your feedback would be of immense help in improving our blog and newsletter. Is this too short/long? Too verbose? Just email us, we would love to hear from you.

Below are the Key Highlights from the Interim Finance Bill 2014:

Direct Taxes: No changes in direct tax rates and provisions. Sorry no changes in the tax rates or slabs. However have heart as one will be able to take advantage of any change even during the full budget presentation.

Excise Duty: Some reduction in excise duty rates may provide selective boost to the sectors. Note that these change in rates are only up to 30th June 2014

1. Small cars / motorcycles / CVs cut to 8% (from 12%)
2. SUVs down to 24% (from 30%)
3. Large / mid-segment cars to 24%-20% (from 27%-24%)
4. Mobile handsets down to 6% [with CENVAT] or 1% [without availing CENVAT]
5. Capital Goods / Non-Consumer Durables down to 10% (from 12%)

Service Tax: Some areas have been exempted from service tax; again selective by essential.

1. Services provided by the cord blood banks
2. Services by way of transportation, loading, unloading, packing, storage or warehousing of rice
3. Milling of paddy into rice

Customs Duty:

1. Basic CD Non-Edible Grade Industrial Oils / its fractions, Fatty Acids and Fatty Alcohols rationalized at 7.5%
2. Exemption from CVD on specified road construction machinery and similar imported machinery is withdrawn
3. Concessional CD of 5% provided on Capital Goods imported by the Bank Note Paper Mill India Private Limited

Others:

• Moratorium on interest on student loans taken before 31 March, 2009; to benefit 9 lakh borrowers (Government will pay interest till Dec 2013 on education loans taken before March 31, 2009)
• The Government appeals to all political parties to resolve and pass the GST laws and Direct Tax Code in 2014-15

Reference links:
http://indiabudget.nic.in/ub2014-15/fb/bill1.pdf
http://indiabudget.nic.in/ub2014-15/bh/bh1.pdf

The Finance Bill 2006 received the Hon. President’s assent yesterday (19th April, 2006).

The immediate implication of this is that the effective rate of Service Tax is enhanced to 12.24%; including education cess. This new rate, in my opinion, would be effective from the date the same is notified.

Stay tuned here for updates on the notifications.

Economic Overview

• Growth rate in 2004-05: 7.5%; while manufacturing sector grew at 8.1%.
• Advanced Estimates indicate that the GDP growth rate is likely to be 8.1% with the manufacturing sector galloping away at 9.4% & agricultural growth up at 2.3%.
• Gross Domestic Savings at current prices increased to 29.1% of GDP & Rate of Gross Capital Formation up to 30.1% of GDP.
• Inflation, as on 11 Feb, 2006, was 4.02%.

Implementing the NCMP Mandate

• Continued focus on fiscal prudence through increasing revenue & controlling expenditure, along with monetary stability.
• Focus on agriculture is yielding results with the food grain output expected to reach 209 million tonnes (up by 5 million tonnes).
• Government has launched the National Rural Employment Guarantee Scheme (NREGS) to fulfil its mandate of promoting employment.
• Food-For-Work Scheme to be launched in the current year.
• Investment rate for the economy increased to 30.1% in 2004-05 as directed in the NCMP.
• The objective of strengthening infrastructure is being aggressively pursued, with over 5,000 MW of power capacity being added in 2005-06, and over 34,000 MW to be added during the 10^th Plan; while over 40,000 un-electrified villages and almost 10,000 electrified villages have been covered under the Rajiv Gandhi Grameen Vidyutikaran Yojana.
• 96% of the Golden Quadrilateral is expected to be completed & functional by June 2006; and the north-south & east-west corridors are expected to be operational by end 2008.
• Focus would continue on improving airports and ports.

Bharat Nirman

• This is supposed to be the vehicle for the government to use resources created from economic growth to enhance infrastructure and provide basic amenities to rural areas
• The focus of this are the following six areas, with targets to be achieved by 2009; namely, Accelerated Irrigation Benefit Programme (AIBP), Accelerated Rural Water Supply Project (ARWSP), Rural Roads Programme, Rural House Construction, & Rural Telephone Connections.

The Flagship Programmes

• In 2005-06, Gross Budgetary Support (GBS) for the Plan was Rs.143,497 crore in 2005-06, which is now increased by 20% to Rs.172,728 crore.
• Education and health to continue to be major focus areas, with proposed allocations of Rs.24,115 crore (+31.5%) & Rs.12,546 crore (+22%) respectively.
• Significant increases in allocations to the Ministry of Development of North-Eastern Region.
• The total allocation for the 8 flagship programmes increased by 43.2% to Rs.50,015 crore.
• Some details of these 8 flagship programmes are given below:

1. Sarva Siksha Abhiyan: Independent surveys indicate that 93% of children in the age group of 6-14 years are in school. Significant additions to number of class-rooms & teachers. Allocation proposed to be increased to over Rs.10,000 crore in 2006-07 to fund 500,000 class-rooms & employ 150,000 teachers. Further, over Rs.8,700 crore to be allocated to the Prarambhik Siksha Kosh from the revenue raised through education cess.
2. Mid-day Meal Scheme: Allocation increased to more than Rs.4,800 crore to ensure lunch to 12 crore school children. This is the largest school lunch programme in the world. Kudos.
3. Rajiv Gandhi Drinking Water Mission: Over 56,000 habitations & 140,000 schools to be covered under this programme with an allocation of Rs.4,680 crore in 2006-07. An additional allocation of Rs.213 crore to be made to fund district-level water testing labs & providing water testing kits.
4. Total Sanitation Campaign: The allocation is increased to Rs.720 crore in 2006-07.
5. National Rural Health Mission: Rs.8,207 crore allocated to ensure that over 200,00 Associated Social Health Activists & over 1,000 community health centres become functional to provide 24×7 services. Leprosy has been eliminated by December 2005 (WHO definition adopted). Endeavour to eliminate polio by December 2007.
6. Integrated Child Development Services: This scheme focuses on ensuring supplementary nutrition to children. This scheme is implemented with the help of the State Governments. The total proposed allocation for this scheme is over Rs.4,000 crores for 2006-07.
7. National Rural Employment Guarantee Scheme: Allocation of Rs.14,300 under this scheme, with more funds to be allocated in case of need as required under the NREG Act.
8. Jawaharlal Nehru National Urban Renewal Mission: The proposed allocation is Rs.6,250 crore; which includes funding for Mumbai metro rail & Bangalore metro rail.

• National Social Assistance Programme: Old age pension under this scheme to be increased to Rs.200 per month (from present Rs.75 per month). This scheme covers destitute persons above 65 years. State Governments are requested to contribute an equal amount. I also propose to work with the Department of Posts and the banks to establish, within two years, a system under which the pension will be credited directly to the account of the beneficiary in a post office or a bank.
• Kasturba Gandhi Balika Vidyalaya Scheme: Rs,300 crore allocated to open 1,000 new residential schools for girls from SC, ST, OBC & other minority communities. Additionally, an incentive of Rs.3,000 to be provided to a girl student who passes the VIII standard examination & enrols in a secondary school. This amount would be deposited in the girl students’ name & would be entitled to withdraw it at 18 years of age.

“To ensure value for public expenditure, an Outcome Budget was presented on August 25, 2005. Government intends to present a Performance Budget on the first Outcome Budget before the end of the Budget Session. The Outcome Budget for 2006-07 will be placed before this House by March 17, 2006.”

Investment

• Equity support of[%name%] Rs.16,901 crore & loans of Rs.2,789 crore to be provided to ailing Central Public Sector Enterprise.
• Total resources allocated are over Rs.122,700 crore.
• Expert body / committee to be constituted to tap the potential of the gems & jewellery industry, & develop India as a hub for this industry.

Agriculture

• Irrigation: The allocation is increased to over Rs.7,100 crore. Programme to repair, renovate & restore 20,000 water bodies covering 1.47 million hectares in the first phase.
• Farm Credit: Banks requested to increase farm credit to Rs.175,000 crore, & add 50 lakh new farmers; with focus on tenant farmers through a separate window for self-help / joint liability groups. Farmers who had availed of crop loads from scheduled commercial banks, RRB’s & PACS for Kharif & Rabi 2005-06 to get an interest relief of 2% of the principal amount (up to Rs.1 lakh). This amount will be credited to their account before 31 March 2006.
• Refinance extended by NABARD for short-term farm credit to be subsidised by the government from the Kharif 2006-07 season. Farmers to be able to borrow short-term funds of up to Rs.3 lakhs at 7% p.a. interest. The Hon. FM to make a detailed statement in due course.
• Plantation Sector: Special Purpose Tea Fund to be set-up for re-plantation & rejuvenation of tea with an allocation of Rs.100 crore in 2006-07.
• Micro Finance: A separate bill to formalise the micro-finance sector to be tabled in this session. Over 8 lakh self-help groups have been disbursed over Rs.4,800 crore. Additional 385,000 SHG’s are proposed to be included in 2006-07. Committee on Financial Inclusion to be formed to identify & resolve issues related to including more cultivator households to banking.
• Horticulture & Fisheries: National Fisheries Development Board to be constituted.

Manufacturing

• Textiles: Allocation to the Technology Upgradation Fund increased to Rs.535 crore. 7 parks sanctioned & another 10 identified for development under the Scheme for Integrated Textile Parks (SITP). Jute Technology Mission to be launched in 2006-07, & a National Jute Board to be established.
• Handlooms: Additional 100 clusters to be covered for life & health insurance for this sector. Yarn depots to be set-up to ensure a continuous supply of yarn to weavers. ‘Handloom’ mark (a.k.a. ‘woolmark’) to be marketed.
• Food Processing Industry: to be treated as a priority sector for bank credit. NABARD to set up a separate fund with an initial corpus of Rs.1,000 crore for re-financing agro-processing infrastructure & market development. National Institute of Food Technology Entrepreneurship & Management to be set-up.
• Petroleum, Chemical & Petro-chemicals: 3 areas to be developed as Investment Regions to aid in the development of large projects.
• Information Technology: Ministry of Information Technology to announce a detailed policy to encourage assembling & manufacture of IT hardware. India Infrastructure Finance Company to provide equity participation & fund viability gaps to new ventures in this sector.
• Small & Medium Enterprises: 180 items identified for de-reservation. SME’s in the services sector to be treated on par with SME’s in the manufacturing sector for funding availability from SIDBI. The Credit Guarantee Trust for Small Industries to be requested to reduce the one-time guarantee fee to 1.5% (from 2.5%).
• National Manufacturing Competitiveness Council: has finalised 10 schemes for promoting various needs. A 5-year programme has also been finalised & will be implemented in 2006-07.
• Cluster Development: An Empowered Group of Ministers to formulate a policy for cluster development. This group will also be required to oversee the implementation of the policy.

Services Sector

• Tourism: 15 tourist destinations / circuits to be developed following an integrated area development approach. This will be in addition to 50 villages to be developed based on their competency in handicrafts, handlooms & culture.

Infrastructure

• Telecommunication: Over 50 million rural connections to be made operational in the next years; thereafter making rural telephony available on demand. A bill to be placed in this session to amend the Indian Telegraph Act.
• Power: Efforts are being made to increase capacity in all areas, viz generation, transmission & distribution. The 82 projects under construction will add around 39,500 MW in the next 3 years. Bids invited for 5 ultra-mega power projects of 4,000 MW each. Empowered Committee of Chief Ministers & Power Ministers to be established to ensure implementation of the power sector reforms.
• Coal: Comprehensive review of Coal Policy underway. 45 coal blocks allotted for captive consumption. Coal reserves of 20 billion tonnes to be de-reserved for power projects.
• Road Transport: Development of 1,000 kms of highways to be awarded on a Design, Build, Finance & Operate (DBFO) basis.
• Maritime Development: Detailed study to identify a suitable location for a new deep draft port in West Bengal to be undertaken.

Financial Sector

• Banking: Special non-tradable securities issued for banking reforms to be converted to tradable SLR Government of India dated securities.
• Insurance: KP Narasimhan Committee Report on a comprehensive law on insurance is being examined by the Insurance Regulatory & Development Authority, based on which a Insurance Act would be created.
• Capital Market:

1. FII limit for investment in government securities increased to $2 billion, & for investment in corporate debt to $1.5 billion.
2. Ceiling on aggregate mutual fund investment in overseas instruments increased to $2 billion. Additionally, the 10% reciprocal share-holding requirement is removed.
3. Qualified mutual funds to be allowed to invest, cumulatively, up to $1 billion in overseas exchange traded funds.
4. RBI’s negotiated dealing system to be extended to qualified mutual funds, provident funds & pension funds.

Other Proposals

• National Agricultural Innovation Project for research in agricultural science to be launched in July 2006.
• Technology Business Incubators set-up at various places with seed funding from the Technology Development Board.
• Rs.100 crore each to be allocated as grant to the Universities of Mumbai, Kolkotta & Madras for a specified research department or a research programme.

Tax Proposals

Note: figures in brackets are earlier duties / taxes.

Indirect Taxes – Excise & Customs Duties

• Peak Customs Rate for non-agricultural products reduced to 12.5% (15%).
• Steel Industry: Customs duty on Alloy steel, primary / secondary non-ferrous metals & ferro alloys down to 7.5% (10%), while that on steel melting scrap increased to 5% (nil).
• Customs duty on mineral products reduced to 5% (15%), with exceptions; & on ores & concentrates to 2% (5%).
• Import duties on materials used to manufacture refractories reduced to 7.5%.
• Customs duty reduced to 5% for basic cyclic & acyclic hydrocarbons & their derivatives.
• Catalysts to now attract an import duty of 7.5% (10%).
• Customs duty on Plastic raw materials like PVC, LDPE & PP reduced to 5% (10%), & to nil for naptha used for plastics, while that on styrene, EDC and VCM reduced to 2%.
• Pharmaceuticals: 5% customs duty on 10 anti-AIDS & 14 anti-cancer drugs, & exemption from excise duty CVD, & 5% (15%) import duty on certain life saving drugs, kits & equipment, & exemption from excise duty & CVD.
• Import duty on packaging machines reduced to 5% (15%).
• Petroleum & Natural Gas: Concessional project import duty rate of 10% extended to pipeline projects for transportation of natural gas, crude petroleum & petroleum products. 146. Cess on domestically produced petroleum crude increased to Rs.2,500 per MT (Rs.1,800 per MT).

The honourable finance minister has been given assurance that this increase in cess will not impact the retail prices of any of the petroleum products.

• CVD of 4% extended to all imports with a few exceptions. Full credit of this duty to be allowed to manufacturers of excisable goods.
• Duty rate for clearance by EOU to the Domestic Tariff Area (DTA) pegged at 25% of basic customs duty plus excise duty on like goods.
• Cotton Textile Industry: Excise Duty on all man-made fibre yarn & filament yarn reduced to 8% (16%), while customs duty on the same is lowered to 10% (15%). Import duty on key raw materials like DMT, PTA & MEG also reduced to the same levels, 10% (15%), while that on paraxylene lowered to 2%.
• Small cars to attract lower excise duty of 16% (24%). Small car defined as one not exceeding 4,000 mm in length & with an engine capacity not more than 1,500 cc for diesel cars & 1,200 cc for petrol cars.
• Information Technology: Packaged software sold over the counter to attract an excise levy of 8%; while customised software & software downloaded from the internet will not attract any excise levies. Further, DVD drives, flash drives & combo-drives to also be fully exempt from excise levies. Excise duty on computers re-introduced at 12% (nil).
• Food & Food Processing: Customs Duty on vanaspati increase to 80%. Excise duty on aerated drinks reduced to the CENVAT rate of 16% (24%). The following items to be exempted from any excise duties: condensed milk, ice cream, preparations of meat, fish and poultry, pectins, pasta & yeast. Excise duty reduced to 8% (16%) on ready-to-eat packaged foods & instant food mixes.
• Footwear & Leather: Two vegetable tanning extracts, quebracho & chestnut exempted from excise duty. Excise duty on footwear with a retail sale price between Rs.250 & Rs.750 to 8% (16%).
• Excise duty on LPG stoves abolished (earlier 8%).
• Energy efficient lamps compact fluorescent lamps (CFL’s) to now attract an excise levy of 8% (16%).
• Paper Industry: Excise duty on specified printing, writing and packing paper reduced to 12% (16%).
• While the import duty on Set-top boxes is reduced to nil (15%), these will attract an excise levy of 16%.
• Excise duty on cigarettes increased by 5%.
• Domestic LPG included in the list of ‘declared goods’ under the Central Sales Tax Act. Hence, state governments will no longer be able to tax domestic LPG.
• Significant reduction in the exemptions granted for customs & excise duties proposed.
• No changes in the exemptions granted to the SSI sector.

Service Tax

• Service Tax Rate increased to 12% (10%).
• New services included within the ambit of service tax, namely,

1. ATM operations, maintenance & management
2. Registrars, share transfer agents & bankers to an issue
3. Sale of space or time, other than in the print media, for advertisements
4. Sponsorship of events, other than sports events, by companies
5. International air travel excluding economy class passengers
6. Container services on rail, excluding the railway freight charges
7. Business support services
8. Auctioneering
9. Recovery agents
10. Ship management services
11. Travel on cruise ships
12. Public relations management services

• Coverage of some additional services expanded.
• Interest & Principal payments incurred for leasing & hire purchase not to be included in calculating the value of service provided.

Direct Taxes

• No Change in the rates or slabs of personal or corporate income-tax.
• 1 / 6 (one by six) scheme abolished.
• Minimum Alternate Tax: Tax payable under MAT revised to 10% (7.5%) of book profits, which will now include long-term capital gains arising from sale of securities. However, corporates can take credit for MAT up to 7 years instead of the earlier restriction of 5 years; & can also take credit for MAT while calculating their interest liability.
• Securities Transaction Tax (STT): Across the board increase by 25%.
• Exemptions under section 80IA (Infrastructure Facilities): Terminal date extended to 31 March 2009 for industrial parks, while that for power projects the terminal date is extended to 31 March 2010.
• Amendments to Section 80C & 80CCC (Savings & Deduction): Investments in Fixed Deposits in a scheduled bank with a tenure of not less than 5 years to be eligible for deduction under section 80C. Contribution to specified pension funds eligible for a deduction of Rs.1 lakh under section 80CCC.
• Open-ended & close-ended equity schemes to be treated on par for the purposes of dividend distribution tax.
• Deduction for dividend or interest or long-term capital gains under section 10(23G): will no long be available from 1 April 2006.
• Anonymous / pseudonymous donations made to wholly charitable institutions to be taxed at the highest marginal tax rate. Such donations to partly religious / partly charitable institutions / trusts to be taxable only if the donations are specifically for educational or medical purposes. Thus, wholly religious institutions / trusts are exempt for this clause.
• Tax Savings under sections 54EC & 54ED: The scope of section 54EC restricted to NHAI & REC only; while benefits under section 54ED are withdrawn from 1 April 2006.
• PAN number to be compulsorily quoted for more transactions that will be notified.
• P AN number to be suo-moto issued in certain cases.
• Fringe Benefit Tax (FBT): Value of fringe benefit changed in the following cases –

1. Tour & Travel reduced to 5% (20%)
2. Hospitality & Use of Hotel Boarding & Lodging facilities for airline / shipping industry reduced to 5% (20%)
3. Free medicine samples & medical equipment distributed to doctors to be exempted
4. Expenses incurred on brand ambassador & celebrity endorsement to also be exempted
5. Employers’ contribution to an approved superannuation scheme exempted upto Rs.1 lakh per employee.

The Economic Survey 2005-06 was released by the Hon Finance Minister yesterday. All the newspapers and other internet websites. Hence, I’ll not be repeating it here.

For those who would like to have soft copies of the Economic Survey 2005-06, here are the links:  All Chapters (.zip file), All Tables (.zip file)

Highlights of the Railway Budget 2006-07

General

• Freight loading in Apr-Dec 2005 up 10% & freight revenues up over 18%
• Working expenses to increase by Rs.1,200 crores mainly due to increase in fuel prices, lease charges paid for rolling stock (including principal repayment which is included in operating expenditure)
• Accounting system is being changed to reflect the correct operating & capital expenditure of lease charges

Technological Upgradation & Modernisation

• New wagons are high-capacity being designed to enable loads of up to 70 tonnes
• Exploring possibility of manufacturing aluminium & stainless steel wagons to improve payload to tare weight ratio; and hence further increase carrying capacity
• 25 tonnes axle-load wagons with carrying capacity of up to 80 tonnes is also being explored
• Technology transfer for manufacture of special wagons to increase Railways’ share in the transportation of commodities like motor vehicles, petrochemicals, etc. is under consideration for which the Railways will provide the necessary policy framework

Use of Modern Signalling & Telecommunication Technology

• Modern signalling & telecommunication means to be used for improving safety & enhancing line capacity on trunk & main routes based on an in-depth study report to be submitted within three months

Use of IT in Improving Railway Services

• The Freight Operating Information System has led to substantial improvement in operational efficiencies. Rake Management System already implemented at all major locations. In the second phase, Terminal Management System to be implemented at all major locations. New Control Charting, Crew Management & Coaching Operations Information System under development, along with complete computerization of Control Office, Coaching Operations Information System & interfacing these systems with National Train Enquiry System

Public Partnership and Public-Private Partnership Schemes

• The Ministry of Railways to use varied models to ensure more public-private partnerships, especially through open bidding
• Committed to construction on ROB’s on a cost sharing basis with many state governments, & assured availability of funds for this
• Policy of permitting private parties to run container trains well received with 14 applicants having deposited Rs.540 crores as registration fee. All the eligible applicants to be permitted to run container trains before 31 st March & model concession agreement to be prepared by the end of current year.
• The first double stack container train in Indian sub-continent to be inaugurated in first week of March
• Rail linked container depots & integrated logistic parks to be created to ensure success of the new container policy through the use of railways’ goods sheds
• Proposals for investments of Rs.250 crores for manufacture of 25 rakes received under the Wagon Investment Scheme

Record Breaking Output in Freight Business

• 25 tonne axle load trains to be run on two non-passenger routes on a pilot basis; & next year 23 & 22.3 tonne axle load trains to be introduced on important traffic routes, in a phased manner. Also, over the next five years, the feeder routes to the new freight corridor to be strengthened to ensure the use of 25 tonne axle loads
• The Preferential Traffic Schedule is modified & freight booked for distances beyond 800 kms to be given priority within the class
• Efforts are towards reducing wagon turn around time, introduction of round-the-clock working in major sidings & goods terminals, terminal improvement and traffic facility works using modern information technology
• Production of new wagons to be substantially increased, along with increase in manufacture of electric & diesel locomotives

Reduction of Losses in Passenger Business

• Focus to be on reducing losses in coaching services by increasing number of coaches & occupancy levels; coupled with reducing travel time
• All India train time-table to be reworked on high priority basis
• More than 200 mail / express trains to be converted to superfast trains
• The number of coaches in about 190 popular passenger carrying trains to be increased up to 23-24 coaches; in addition platform lengths at 200 stations to be increased to ensure passengers are not inconvenienced
• Passengers from lower classes to be automatically upgraded to higher AC classes on all Pajdhani and mail / express trains

Reduction in Losses in Parcel & Catering Business

• Leasing out pantry cars & catering units at large stations has yielded substantial licence fees; this process to be continued through open bids to maximise revenues
• Food plazas, food courts, vending machines, etc to be installed at stations & in trains to improve catering facilities, and increase revenues
• To increase revenues from parcel business, the leasing policy of brake & parcel vans has been liberalized
• Parcels can be loaded & unloaded at all stations where the halt is 5 minutes or more
• Leaseholders to prepare the loading manifest
• To eliminate incidence of theft in luggage vans all brake vans carrying parcels and luggage will be strengthened with steel walls
• The 150 kg ceiling for booking luggage in the brake van removed
• The luggage portion of all brake vans of ordinary passenger trains to be converted to second-class compartments

Year of Passenger Service with a Smile: 2006

• The year 2006 shall be the year of Passenger Service with a smile

Strategy to Shrink Queues at Booking Counters

• The facility of i-ticket and e-ticket made available on all mail and express trains
• The charges for e-tickets reduced by Rs. 20 per ticket in higher classes and by Rs. 15 per ticket in sleeper class
• Passengers can now buy i-ticket and e-ticket through Rail Travel Service Agents
• All 1310 PRS centers & 425 UTS centres to be operational by end of the current year
• A pilot project to be implemented to install 200 automatic ticket vending machines in Mumbai suburban area of Central and Western Railways which will be connected with the UTS & will dispense tickets automatically through smart cards
• Under the Jansadharan Ticket Booking Scheme umpeloyed youth will be given ownership for pre-paid UTS counters and under the Gramin Ticket Booking Service, agency to be given at roadside stations to unemployed rural youth for issuing tickets

Improvement in Passenger Amenities

• All class ‘A’ & ‘B’ category stations to be showcased as model stations with the help of architects to make station buildings more beautiful, comfortable & with a modern look
• Modern facilities, such as ATM, cyber cafes, etc. to be provided at all major stations
• Under a new policy for commercial publicity the publicity rights for an entire division to be given to a single agency selected through open tender

Modern Facilities in Passenger Trains

• More Rajdhani and Shatabdi trains to be run with the modern LHB design passenger coaches
• During rebuilding of coaches, facilities such as more comfortable seats, public address system & electronic information display, better lights, etc. to be provided

Railway Safety

• Overaged tracks, bridges & track circuiting works on all stations on A, B & C routes to be completed by March 2007
• Light rails on golden quadrilateral & its diagonals to be replaced by heavy rails & the works of multi-aspect colour light signalling to be completed at all the stations located on A & C routes

Staff Welfare

• Contribution to Staff Benefit Fund for the next year to be increased to Rs,226 per employee (from Rs.26 per employee)
• Construction works of officers / staff quarters, community centres, staff institutes & officers’ clubs in the headquarters of all new zones, divisions and other areas to be completed in a time bound manner, after acquisition of the land
• Quality shoes, socks, gloves, summer/winter uniforms and necessary implements to be made available to gangmen and keymen
• New super-specialty hospital with facilities in cardiology & nephrology to be setup at Patna
• Three new divisional hospitals to be setup at Agra, Raipur & Nanded

Concessions

• 50% concession in Second Class fares to farmers and milk producers for travel to institutes of national level in other parts of the country for the purpose of training/learning better agricultural practices and dairy farming announced earlier extended to Sleeper Class
• 50% concession in Second Class & Sleeper Class fares to persons who have lost their limbs in accidents or due to any other causes, for travel to institutes of national level, for transplantation of artificial limbs along with one attendant

Passenger Services

• Sir, on the 18th of February “the Thar Express” has been introduced between Munabao in India and Zero Point railway station near Khokhrapar in Pakistan. This weekly broad-gauge express passenger train would help cultivation of people to people contact of the two countries.
• 71. People of all religions and communities from all corners of the country visit dargah of Khwaja Garib Nawaz Hazrat Muinuddin Chishti Saheb in Ajmer to pay their obeisance. For the convenience of devotees, I propose to run Garib Nawaz Express from Ranchi, Kishanganj and Bangalore (Yashwantpur) to Ajmer.
• 72. Indian Railways have started running 150 kmph speed trains in Delhi – Agra Section. Now the journey between Delhi – Agra can be covered in just 1 hour 56 minutes. Soon a 150-kmph passenger train will be started on the Delhi-Kanpur-Lucknow route also. Next year the maximum speed of some mail/express trains connecting towns such as Ajmer, Jaipur, Varanasi, Chapra etc will be increased from 110 kmph to 120 kmph.
• 55 new trains to be introduced; 37 trains to be extended; frequency of 12 trains to be increased in the current year & 2 trains to be re-routed

Construction of Freight Corridor

• Proposed to construct Dedicated Multimodal High Axle Load Freight Corridor with computerised control on Western and Eastern routes at an estimated cost of Rs.22,000 crores
• First phase of the Eastern Corridor Project, a separate freight corridor to be built from Ludhiana to Sonnagar via Ambala, Saharanpur, Khurja & Allahabad. Primary feeder routes to be upgraded to carry heavier trains of coal & steel traffic & also extended up to ports in West Bengal
• The Western Corridor to be from Jawaharlal Nehru Port routed via Vadodara, Ahmedabad, Palanpur, Jaipur & Rewari to Tuglakabad & Dadri. Both the corridors will be joined by a link between Dadri & Khurja. The feeder routes of the Western Corridor connecting ports of Gujarat to also be upgraded

Annual Plan 2006-2007

• Plan outlay for 2006-07 kept at Rs.23,475 crores; excluding outlay provided for national projects
• The internal resources to contribute 46% of the outlay
• For the year 2006-07, the total funds received from General Exchequer: Rs.7,511 crores; including Rs.1,365 crores for SRSF, Rs.711 crores from Central Road Fund
• A provision of Rs.10,794 crores is proposed through internally generated resources; while the total amount to be mobilized through extra-budgetary resources is Rs.5,170 crores out of which Rs.4,170 crores to be through market borrowing
• The thrust of the Annual Plan is towards early completion of throughput enhancement works, safety, development and expansion of the network to sustain higher growth rate in Railways
• Additional funds of Rs.2,092 crores have been sought from Ministry of Finance for the national projects of Jammu & Kashmir & Northeast region

New Lines, Gauge Conversion, etc.

• Over 550 kms of New Lines to be completed in the current year; while over 1100 kms of gauge conversion to be completed
• Doubling of about 600 kms is likely to be completed

Suburban Transport Projects

• In Mumbai, four additional rakes for the suburban services of Western Railway & two rakes for passenger services in the Central Railway to be made available in the coming year
• The extension of Kolkata Circular Railway completed & commissioned to traffic
• On Chennai MRTS, Tirumailai-Tiruvamniyur section of Tirumailai-Velacheri phase II has been commissioned

Dynamic Pricing Policy for Passenger Fares & Freight Rates

• Dynamic Pricing Policy to be introduced for freight & passenger based on peak / non-peak seasons, premium / non-premium services, & busy / non-busy routes
• Non-peak season for freight to be 1^st July to 31^st October; and for passenger services non-peak seasons to be 15^th January – 15^th April & 15^th July – 15^th September

Freight Services

• No increase in freight service rates
• Highest class lowered to 220, freight rates of diesel and petrol less by 8%
• Over the next 3 years, highest class to be lowered below 200 & rates for highest classification to be less than double that of lowest classification (except rates of some light commodities)
• Commodity groups further reduced from 80 to 28 groups
• New classes 90 W1, 90 W2 & 90 W3 introduced earlier to be replaced with classes, namely, LR1, LR2, LR3, LR4 & LR5; which will be equivalent to 90%, 80%, 70%, 60% and 50% respectively of the class 100
• Freight Discount Scheme: Freight rebate of 15% to be offered for incremental freight revenues of over Rs.5 crores a month & 10 % if the incremental earning is less than Rs.5 crores during the non-peak season (1^st July – 31^st October)
• Rebate to be applicable for all commodities except coal, minerals & items with classification below 120
• Empty flow Direction Freight Discount Scheme: For distances beyond 700 kms, the discount (on incremental freight) to be 30% during non peak season & 20% in the peak season (over 1000 kms only in case of open wagons in peak season)
• The scheme to be applicable for all items loaded in covered wagons; while in case of open wagons, the discount to be applicable for all commodities except coal, coke & iron-ore for export
• Loyalty Discount Scheme: During the non-peak season, discount in freight to be given based on per cent of total production of finished product transported by rail. If over 90% of the production of any steel or cement factory is transported by rail, a discount of 1% in freight to be given & the discount to be 0.5% if the share of rail transportation is above 50% but less than 90% of the total production
• Long-term Freight Discount Scheme: Zonal railway administrations empowered to offer long-term freight discount to attract new customers & new freight traffic. Discounts of up to 20% during non-peak season & up to 10% in the peak season, over the normal rates, for a period of three years can be availed. For loading in empty flow direction, the discount available would be up to 20% & 30% during peak season & non-peak season, respectively
• Mini Rake & 2-point rake Scheme:  to be extended to both peak & non-peak seasons; while during the nonpeak season, mini-rakes, 2-point rakes to be made available without any additional charge, during the peak season, for commodities up to class 130, freight rates to be at a premium of 5% more than the rate for block rake trains
• Freight Forwarder Scheme: Under this scheme during non-peak season, freight to be charged under Class LR2 in empty flow direction & under Class 100 in the loaded direction; while during peak season, freight to be charged under Classes 100 & 130 respectively. Additionally for round-trip loading i.e. for loading offered simultaneously for both the directions, the freight to be charged under LR2 during non-peak season & under Class LR1 during peak season. This scheme to be applicable only for freight offered for more than 700 kms

Passenger Services

• Passenger fares reduced by 10%-18% for AC classes
• In the new structure, the fares of AC First & AC Second Class to be 11.5 & 6.5 times the Second Class fare, respectively; a reduction of 18% in AC-I & 10% in AC-II class fares
• Fully Air-Conditioned Garib Rath: a fully air-conditioned Garib Rath to be run on a pilot project basis between Delhi-Patna, Delhi-Mumbai, Delhi-Chennai & Saharasa-Amritsar. Fares to be about 25% lower than the present AC-3 tier fares
• The renewal period of Monthly Season Tickets increased from 3 days to 10 days
• Superfast charges applicable on MSTs & QSTs reduced to 25% of current level
• Military traffic tariff’s to be rationalised on no-profit no-loss basis
• “The Thar Express” between India & Pakistan inaugurated

Quick Links: Railway Minister’s Budget 2006-07 Speech, Railway Budget Highlights