Jul 15, 2016

Merge Railway Budget with General Budget: Prabhu writes to Jaitley

New Delhi: Minister of Railways Suresh Prabhu in a letter to finance minister Arun Jaitley recommended that the 92-year-old practice of presenting a separate budget for the Railways be discontinued and merged with the general budget.

“Integrating the rail budget with the general budget will enable formulation of a seamless national transportation policy, while insulating the Railways from political pressures,” Prabhu is understood to have said in the letter sent sometime in June.

“No reply has yet been received from the Finance Minister yet,” highly placed sources told.
After Niti Aayog member Bibek Debroy recommended the merger last month, the Prime Minister’s Office (PMO) sought a reply from the Railways. “With the Railways Minister having responded, the issue has moved forward. It is quite likely that no rail budget will be presented next fiscal,” sources said.

Since its inception in the 1924-25 fiscal year, the rail budget has been a separate feature for over 9 decades. “The Railways today do not constitute a major chunk of government revenues, as it did in the past. Annual financial outlays of several public sector undertakings are today bigger in size, as compared to the Railways.”

“The initiative (integrating the Rail budget with the General budget) is a step in the right direction,” Railways expert Raghu Dayal said.

With Railways staring at financial bankruptcy on account of falling revenues and a mounting Operating Ratio (ratio of paisa spent against a rupee earned), representatives of employee unions of the country’s biggest employer have backed the move.

In the current fiscal year’s first two months, earnings were 9% short of target, while the OR has hovered in the region of 110% – in other words – Railways spent 110 paise to earn 100 paise.

The Railways carry an accumulated burden of a whopping Rs 4,83,511 crore towards execution of 458 unfinished and ongoing projects, while its losses in operating passenger services amounts to another Rs 34,000 crore. The company is also accountable for annual dividend payment against the Gross Budgetary Support (GBS) component that it gets from the finance ministry.

“In the event of a merger, the entire financial burden can get transferred to the Finance Ministry. If the current crisis continues or escalates, the Railways might not be in a position to pay salaries or pensions”, a senior ministry official said.

Salaries and pensions constitute the biggest component of railway spending – 55.5 paisa for every rupee earned. The Depreciation Relief Fund (DRF) component of each general budget has normally been placed below 5 paisa (of every 100 paisa spending).

 

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