Sep 22, 2016

India’s Rail & General Budget on same track after 92 years!

Government of India scraps Railway Budget, orders its merger in teGeneral Budget.

Union Railway Minister Mr.Suresh Prabhu with Finance Minister Mr.Arun Jaitley at a joint press meet held at New Delhi.
New Delhi: The government finally bit the bullet on Wednesday by deciding to do away with a separate railway budget and merging it with the general Budget.

The decision to end the 92-year-old tradition was taken by the Union Cabinet on Wednesday, where it was also agreed in-principle to advance the date of the Budget’s presentation in Parliament from the usual February end.

The actual date for presentation of the general Budget for 2017-18 will be decided by the government after taking into account the ensuing Assembly elections, finance minister Arun Jaitley said while briefing the media about the Cabinet’s decisions.

“Cabinet has decided that rail budget and general Budget will amalgamate. There will be only one Budget which will be the general Budget and all proposals with regard to the railways will be part of the general Budget. Consequently, there will be only one Appropriation Bill,” Mr Jaitley said.

The Cabinet has also decided to do away with the plan/non-plan expenditure classification in Budget 2017-18 and replace with “capital and receipt”.

Rail minister Suresh Prabhu, who was present at the media briefing, said that the merger of rail and general Budget will not impact the functional autonomy of the railways but, instead, help in enhancing capital expenditure.

“One single Budget will mean railway and general Budget will work in harmony,” Mr Prabhu said, adding Railways will not have to pay dividend to the government.

The end of a separate Budget will be a relief for the Railways, since its revenue deficit and capital expenditure will now get transferred to the finance ministry.

“All proposals regarding the Railway budget will be part of general Budget, which will have a separate discussion on railway expenditure,” the finance minister said.

Asked who will decide on passenger fare and freight rates, Mr Jaitley said, “These decisions will continue to be taken by the Railways.”

A common Budget will allow a seamless national transportation policy, insulating the railways from political pressures.

Mr Prabhu had played an active role in seeking the railway budget’s merger with the general Budget. Niti Aayog too had mooted the proposal to the PMO.

The government, Mr Jaitley said, was in favour of advancing the budgetary exercise so that it could be completed before March 31 and expenditure on public-funded schemes could begin from April 1.

“While we in-principle are in favour of advancing the Budget date and finishing the entire financial business before March 31… The actual dates will be decided after consultations depending on calendar of the state elections,” he said.

The crucial Uttar Pradesh Assembly polls are scheduled to be held in March 2017.

Mr Jaitley added that the Centre is keeping itself in a “state of readiness” to advance the Budget presentation.

As per tradition, the Budget is presented on the last working day of February. A separate railway budget was started by the British in 1924 and it was usually presented two days before the Union Budget.

The previous NDA government led by Atal Bihari Vajpayee had changed another British-era practice in 2001, advancing the time of presenting the budget to 11am from 5pm.

Economic affairs secretary Shaktikanta Das said the Central Statistical Organisation (CSO) will provide provisional advance estimates of national income or GDP by January 7 so that the data can be incorporated in preparation of Budget.

The provisional advance estimates, he hoped, would be in line with the one normally released by February 7.

Mr Das said the government will issue Budget circular in a day or two.

Mr Jaitley said the report of a committee headed by Niti Aayog member Bibek Debroy had observed that presenting a separate railway budget is only a ritual as its size has become very small compared to the general Budget. It had suggested that rail budget be a part of the government’s overall fiscal discipline and the developmental approach of the Budget.

The finance minister said the government will continue to maintain the distinct identity of the railways and its functional autonomy.
Merger raises more queries than answers: Dinesh Trivedi, former Union Railway Minister

Dinesh Trivedi, former Union Minister of Railways

The best thing about today’s decision to merge the railway budget and the Union budget is that the railway minister will be saved the biggest headache he faces every year – make a budget that will strike a balance among populist needs, the requirement of the country and the financial constraints of planning anything new.

Now, whether the move will do some good to the health of our faltering railways is something which only time will tell.

The Union budget and the railway budget were separated in 1924 after a decision to this effect was taken by the Legislative Assembly, the predecessor to our Parliament.

Rationally and logically, an act of legislature can and should be undone only by an act of legislature, not by an executive fiat.

The issue – merger of the two budgets – was not debated either in the standing committee of Parliament on railways or with the many experts who have spent their lifetime in the railways and are well-versed with the functioning of this gigantic body.

I wonder how we can call this a democratic decision? I also wonder what function the standing committee on railways will now have. Its main job was to sieve through the railway budget. The committee, it seems to me, will now be jobless.

We have always held that what is really good for the railways is a huge investment push to build and repair its infrastructure. One wonders how the merger will help realise this goal. Will a mere merger of the two budgets mean that the Union government will start pumping in more capital into the railways?

I was also intrigued by the announcement that the railways would be treated as a commercial enterprise. If that is indeed the opinion of the government, one wonders how the various lines we build for strategic and social needs will be funded.

I also wish to understand how the deficit of the railways will now be addressed – will it be added to the fiscal deficit? How will the railway debt be treated? Will it be part of the national debt?

If the railways is on a par with various transportation arms of the government, the raison d’etre for a separate ministry also ends. We do not have a ministry for Air India, nor then should we have a ministry for the Indian Railways. We can merge the ministry with other surface transport ministries.

I also have a feeling that this step, which takes the railways out of the limelight, is a prelude to the privatisation of our rail set-up.

Some sections of the society will certainly be cheering today’s decision. However, they do not represent India.

The common man living in the Naxal-affected jungles or in a marginal farm on the slopes of the Himalayas will be left out from the cold logic of a “commercial enterprise”.

They could earlier hope to talk to the monolithic railway bureaucracy through their MPs and perhaps wrest a much needed connectivity. I wonder who will speak for them now and to whom.